Following the breakaway of the Social Democratic Party (SDP) from the Labour Party in March 1981, the new party entered into an informal alliance with the existing centre party, the Liberals, led by David Steel. The SDP fought its first byelection, in Warrington, with future leader Roy Jenkins standing as "SDP with Liberal support".
By the autumn of 1981 this was formalised into an alliance, with both parties agreeing to stand down in each other's favour. Between 1981 and 1983 the parties together won seats in byelections in Croydon North East (Bill Pitt, a Liberal), Liverpool Crosby (Shirley Williams of the SDP) and Glasgow Hillhead (Roy Jenkins of the SDP).
The Alliance did quite well in the 1983 general election, running Labour very close, winning 25% of the national vote (to Labour's 28%) and having 23 MPs. However, the alliance failed to maintain momentum. In the 1987 general election, the share of the vote for each party fell slightly, and both parties lost seats.
By 1987 relations had become fraught. As a result David Steel proposed a merger of the two parties in 1987, following that year's general election. The majority of both parties agreed and a merger was effected early in 1988. Small fractions of both parties established new parties under the names of the SDP and the Liberal Party - as both fractions were made up of those members who least trusted the other's party there was no chance of the two 'continuing' parties would co-operate. As a result the re-established SDP was soon wound up.