Hugh McFadyen says he will step down as leader of Manitoba's Progressive Conservatives, following a "disappointing" election showing against the New Democrats.

The Tories were defeated by the incumbent NDP on Tuesday, although McFadyen said the Tories had grabbed more than 40 per cent of the popular vote.

"It's far short of we had hoped for; it's far short of what we had expected," he told supporters in Winnipeg. "It's a disappointing night for all of us in terms of the outcome."

The NDP won 37 of the province's 57 seats, the PCs earned 19 seats, and Liberal Leader Jon Gerrard kept that party's sole seat in River Heights.

Elections Manitoba is looking at least one recount in the Kirkfield Park constituency in Winnipeg, which was won narrowly by the NDP.

The popular vote on Tuesday was much closer, with the NDP receiving 46 per cent compared with the PC's 43.9 per cent. The Liberals earned 7.5 per cent.

"The reality is this in politics … you have to deliver bottom-line results if you want to carry on as leader of the party," McFadyen said.

"We didn't get the result we wanted, and so I am announcing tonight that I will be stepping down as our party leader, and I'll be inviting others to step up and take the opportunity to lead our party into the future."

Re-elected in home riding

McFadyen was re-elected in Fort Whyte, his home riding in Winnipeg. He secured 62.5 per cent of the vote over Liberal candidate Chae Tsai and Sawinder Dhaliwal of the NDP. He has represented the riding since he won it in a 2005 byelection.

McFadyen said he will stay on as party leader until a successor is found, and will stay on as MLA for now. He added that he will take time to think about his future, and he will consult with party officials about the timing of a PC leadership convention.

Former Tory MLA and deputy premier Jim Downey told CBC News the PC leadership race "starts now."

NDP Leader Greg Selinger said he wished McFadyen wouldn't have made such a hasty decision.

"We lose elections, we win elections. I really wish people would take a little more time," Selinger told reporters.

"But if that's his final decision, I want to honour his contribution and the years he gave to public office. I know that his life will be very positive for him as he goes forward."

Put on defensive early

Political observers had predicted a close election race between McFadyen's party and Selinger's party.

A Probe Research poll conducted for the Winnipeg Free Press and released four days ago pegged NDP support at 46 per cent and PC support at 43 per cent.

From the start of the 28-day election campaign, McFadyen had to defend himself from an attack ad campaign launched by the NDP.

The ads accused McFadyen of harbouring a secret agenda to privatize Manitoba Crown corporations, including Manitoba Hydro, Manitoba Public Insurance and parts of the health-care system.

The NDP's campaign forced the Tories into a defensive position, posting billboards denying any privatization plans.

It wasn't until later in the campaign that the PCs rallied with their own attacks, accusing the NDP of being soft on crime and having a secret plan to raise provincial taxes.

The Tories and the NDP also clashed on the issue of where to build the Bipole III hydroelectric transmission line.

The NDP has come under fire from McFadyen and other critics for its plan to build the transmission line along the west side of Lake Manitoba.

McFadyen has said that if his party is elected, it would run the line along the east side of Lake Winnipeg.