They'll still exist, but in much the same form as the Liberals did after 1914. A shadow of their former selves.
I can't think of what could possibly replace them as the opposition party. I suspect that the LibDems will veer to the left in order to replace them as the party of the left (Ironic really, seeing as Labour once upon a time replaced them as the party of the working class).
The LibDems have already started, with calls for nationalisation of the banks, an unwillingness by the likes of Chris Huhne to defend Free Speech properly, and a simmering social democrat constituency just waiting to rear its head.
We'll see what happens.
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