Instead of voting on national issues and punishing Labour, the electorate voted against local incumbents, according to LGC elections experts Professors Colin Rallings and Michael Thrasher.
All three mainstream parties were claiming victory, but only Labour did surprisingly well, its net losses limited to eight councils.
The Conservatives made a modest nine net gains and won around 250 seats, indicating they are not on track for a victory or even a comeback at the next general election.
Profs Rallings and Thrasher said: 'The direction of change, though not exclusive, was often against the incumbent party.'
Independents and extremists also made an impact. Independents won two out of the seven mayoral elections, with Ray Mallon's victory in Middlesbrough Council and Stuart Drummond's victory in Hartlepool BC. The British National Party gained three seats in Burnley BC.
Professor Thrasher said the 2003 local elections would be 'make or break' for the Tories. 'They will almost certainly be the largest party in local government but they need a share of 40% or above to even have a chance of winning the next election.
'I still don't think people's protest vote necessarily goes to the Conservatives. There are still people who say 'I'm unhappy with Labour but I'm not going to vote Conservative because of their past'.
'The public don't know what the Conservatives stand for. They are in the middle of a policy review.'
But Tory leader Iain Duncan Smith
called the results 'genuine progress for the first time in a decade'. He added: 'People recognise that the Conservative Party is changing.'
Local Government Association Tory group leader Gordon Keymer said: 'The opposition threw everything at us and we still got an extremely good result.'