Ontario Progressive Conservative Leader John Tory announced Friday he will step down as party head once an interim leader is selected after he failed in his bid to regain a seat in the legislature.

Ontario PC Leader John Tory failed to win a seat in the legislature, losing Thursday's byelection to Liberal Rick Johnson. (Peter Redman/Canadian Press)

The move comes after Tory, who has not held a seat since 2007, suffered a shocking byelection loss on Thursday to Liberal Rick Johnson.

During a news conference at Queen's Park with his wife Barbara Hackett, Tory said he tried his best and was leaving politics with his integrity "intact." He also denied any interest in running against David Miller a second time in the 2010 Toronto mayoral elections.

"I just think it's time for me to sit down and take stock of my life," a tired-looking and at times emotional Tory told reporters as his wife and three children looked on in the gallery.

In the face of a string of defeats, Tory also defended some of his achievements as party leader and said he would never be a "show business" candidate.

"I am who I am," Tory said. "I leave a party that is in much better shape financially than the essentially insolvent organization that I inherited."

The final byelection results showed Johnson winning the riding of Haliburton-Kawartha Lakes-Brock by 906 votes. Tory drew 41 per cent of the vote to Johnson's nearly 44 per cent.

The sitting PC member, Laurie Scott, resigned so Tory could seek the seat. Scott won the riding by close to 10,000 votes in the 2007 election.

The sprawling central Ontario riding — one of the poorest in the province — has been held by the Conservatives since 1994, when former cabinet minister Chris Hodgson was elected.

'Give people a sense of hope,' Tory urges premier

Tory's byelection defeat came even as Premier Dalton McGuinty's Liberals contend with staggering job losses in the province's manufacturing sector.

Earlier this week, Ontario Finance Minister Dwight Duncan announced the province is headed for a deficit of $18 billion over the next two years as it combats the effects of the global economic downturn.

During his remarks, Tory offered some sharp criticism of McGuinty's handling of the current economic crisis and urged the premier to act immediately to help the thousands of Ontarians currently suffering.

"Show just the slightest sense of urgency, about people and organizations that are really hurting out there, lots of them," Tory said.

"Give people a sense of hope by doing something now, and not just saying that you are going to."

McGuinty thanked Tory on Friday for his "dedication to public service," while adding that despite any differences he had with Tory, he never doubted his rival's commitment to the province.

Traditional Tory stronghold lost

Tory, a millionaire business leader who headed various divisions of the Rogers media and television empire, advised Ontario Premier Bill Davis and Prime Minister Brian Mulroney in the 1980s, and was widely considered a star conservative candidate-in-waiting.

His first foray into politics came in 2003, when he finished runner-up to Miller in Toronto's mayoral race.

After winning the Ontario PC leadership in 2004, Tory won a 2005 byelection in the riding of Dufferin-Peel-Wellington-Grey. In 2007, he decided to run in his hometown Toronto riding of Don Valley West, where he lost to the Liberal incumbent, Education Minister Kathleen Wynne.

It took Tory another 15 months to persuade one of his colleagues to give up a secure seat so he could again lead the party from the floor of the legislature. During that time, Tory had outspoken MPP Bill Murdoch ejected from the PC caucus for questioning his decision to stay on after the 2007 election loss.

Johnson, 54, is a school board chairman who has lived in the Kawartha Lakes village of Pontypool for more than 20 years.

Flaherty: 'I'm not interested' in PC helm

Even before Tory announced he would resign, the names of several candidates to replace him at the PC helm began swirling, including MPPs Tim Hudak and Christine Elliott, the wife of federal Finance Minister Jim Flaherty.

Flaherty, a former Ontario finance minister in the Mike Harris Progressive Conservative government, was quick to rule out a provincial leadership bid.

"I shouldn't talk much about provincial politics, especially since as you know my spouse is a member," Flaherty said when reporters questioned him after a speech in Toronto Friday.

However, he went on to say that he was "disappointed" over the byelection result.

Pressed to say whether he would consider a bid to replace Tory, he said bluntly: "I'm not interested nor will I be interested."

Flaherty said he already had a very challenging job, and "as long as the prime minister wants me to see it through, I will see it through."

As for whether his wife Elliott, who represents the provincial riding of Whitby-Oshawa for the Progressive Conservatives, might be interested in replacing Tory, he said: "Ask her."

With files from John McGrath and the Canadian Press