I wish John Major all the luck in the world Outgoing Prime Minister Margaret Thatcher

Mrs Thatcher told reporters the country had become a much improved place in which to live since she took office in 1979.

"We're leaving Downing Street for the last time after eleven-and-a-half wonderful years and we're happy to leave the UK in a very much better state than when we came here," she said.

She also gave her support to her successor. "Now it's time for a new chapter to open and I wish John Major all the luck in the world," she said.

'Part of history'

After the speech she and her husband, Denis, were driven to Buckingham Palace, watched by a small crowd keen to witness this significant moment.

"It's part of history and we'd just like to say good bye and wish her well," said one onlooker outside the gates of the palace.

Mrs Thatcher had a half-hour meeting with the Queen before returning to her private home in Dulwich, south London.

Fifteen minutes later Mr Major arrived at the palace and was formally invited by the Queen to form a new administration.

The premiership of Britain's first female leader - and the longest since 1827 - was at an end.

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