LABOR candidate Jeff Drayton has said his party needs to do "some real soul searching" after conceding victory to Nationals opponent David Layzell.
"Earlier this morning, I phoned David Layzell to congratulate him on his election as the next member for Upper Hunter," Mr Drayton said in a statement.
"Obviously, David and I don't agree on many things but we both have the best interests of the Upper Hunter at heart.
"I wish David and his family all the best as he starts this new role."
The by-election is all but over with the Nationals holding 31.2 per cent of the primary vote on Sunday morning.
Labor's primary was down about 9 per cent on its 2019 result with Mr Drayton holding 20.8 per cent after 56 per cent of the ballots had been counted.
Mr Drayton said Labor had faced an "uphill battle" to claim victory but the outcome was a telling result for the party two years out from the next general election.
"Our result yesterday, particularly in Singleton, is a warning to Labor that we can't take any community for granted," he said.
"Working class communities are hurting and they're turning away from this government.
"However, right now, they don't see Labor as the answer.
"Labor needs to do some real soul searching as to how we will win these communities back.
"It's going to take honest reflection and a lot of hard work."
The result will fuel further speculation about Jodie McKay's future as Labor leader.
Mr Drayton said he would take some time out with family following the long campaign.
"I was proud of the huge support I received in places like Muswellbrook, Denman, Aberdeen and Sandy Hollows," he said.
"Unfortunately, we couldn't replicate those results in the other parts of the electorate yesterday."
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