London’s councils should be given new powers to shut down lawbreaking high street shops after two breaches in a single year, ministers have been told.
Local authorities in the capital can spend months pursuing businesses for individual breaches of planning, waste, licensing and other rules without a straightforward route to close down persistent offenders.
New analysis from the Centre for British Progress, seen by the Local Democracy Reporting Service (LDRS), has found the capital is experiencing a proliferation of shady stores that act as a front for money laundering, the sale of illicit goods or other crimes.
They say the issue overlaps with phoenixing, which involves an individual stealing from creditors by repeatedly setting up companies and making them insolvent.
Credit: Centre for British Progress
The organisation has now demanded that councils be given the right to shutter businesses on a ‘two strikes and out’ basis. Currently, closure orders can be sought on the basis that crime or disorder is likely to take place inside or near the premises.
But local authorities are “cautious about expending funds on the legal process”, they say, “particularly when a successful closure order will still only see the shop shut for three to six months.”
“This legal tool has not been widely used by local authorities to stamp out dodgy shops,” the report says.
“Where closure orders have been deployed, that will usually be the work of a particularly proactive trading standards or local police team.
“Providing councils with a clearer and quicker route to closing stores would in turn help national law enforcement bodies.
Relatedarticles
“At present, councils are largely powerless while national law enforcement bodies are overwhelmed by the scale of the task.
“The policies proposed here would create a new divide and conquer model: local authorities would clear out most small-scale offenders, allowing the NCA to focus on the more sophisticated actors.”
They also called for an Irish-style system whereby directors of insolvent companies have to demonstrate good conduct or provide a capital buffer before they can serve as directors again within the following five years. They say that directors are disqualified or restricted following insolvency at around three times the rate in Ireland as in the UK.
At one shop unit at 7 Coventry Street in Westminster, seven different companies occupied the premises between 2017 and 2024 and all failed to pay business rates, costing the council more than £3 million.
The report also cited a case in North London where a business continued trading despite repeated breaches included unlawfully occupying the pavement, unsuitable waste disposal and operating without registered company directors.
Within weeks, the authors said local residents were reporting anti-social behaviour – including the restaurant’s windows being smashed – and minimal evidence of the restaurant actually attracting customers. Despite this, the council still lacked a straightforward legal power to close the premises.
It is estimated that £1 billion is estimated to be laundered through British high streets every year, while phoenixing was responsible for an estimated £836 million in losses to the Exchequer in the 2022-23 financial year.
Labour MP Joe Powell, who represents Kensington and Bayswater and sits on the All-Party Parliamentary Group on Anti-Corruption and Responsible Tax, told the LDRS: “High streets should be at the heart of our communities, not a haven for criminality.
“Phoenixing, where a shop continues trading while cycling through multiple limited companies, has allowed bad actors to evade scrutiny for too long.
“My constituents have told me time and again that they want thriving high streets, not a revolving door of rogue businesses. That’s why I’ve been working with residents to push for stronger action.
“The Government’s plans to crack down on phoenixing and shut down businesses linked to illegal activity are welcome measures. They are an important step towards restoring confidence in our high streets and ensuring they work for the communities they serve.”
The Ministry for Housing, Communities and Local Government (MHCLG) did not respond to a request for government.
In August the Prime Minister announced new measures to double maximum length of Closure Orders from six to 12 months, “giving police and local authorities more time to investigate premises linked to organised crime, pursue prosecutions, and prevent rogue businesses – from illegal vape shops, and dodgy barber shops – reopening before investigations are complete.”
