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Uber is to be sensationally stripped of its licence to operate in London in a huge blow to the ride-hailing firm.

The dramatic announcement today by Transport for London chiefs will dismay 3.5 million Londoners who have come to rely on cheaper rides.

The decision also raises questions over the future of 40,000 minicab drivers who ply a trade with Uber in the capital.

Mayor Sadiq Khan, who heads up TfL, said after the shock ruling that “companies must play by the rules”.

Uber said its users and drivers would be “astounded” by TfL’s decision and accused the transport body and the Mayor of “caving in” to a small number of critics.

The firm confirmed it would “immediately” challenge the decision in the courts.

However the technology giant’s expulsion by TfL will delight opponents, including the black cab trade, who have criticised its safety record.

Others have raised concerns over the San Francisco company’s business methods and argue it has contributed to worsening traffic congestion on London’s streets.

Uber’s lawyers will now pore over the decision which is almost certain to be challenged in a lengthy courtroom battle.

TfL ruled that Uber was “not fit and proper” to hold a private hire licence and had shown a “lack of corporate responsibility” in relation to public safety.

Its licence is currently due to expire next Saturday, September 30. The app firm has 21 days to appeal the decision. However, they can continue to operate on London’s streets while the legal process is exhausted.

In May Uber’s licence was extended for just four months, instead of the usual five years, raising uncertainty about its long-term future in London.

The issue is politically sensitive for the Mayor although both his officials and TfL stressed that he was not personally involved in the decision. The decision was made by TfL chiefs on the advice of lawyers.

He is understood to be concerned about the safety of the Uber service, amid claims of alleged sex attacks by drivers, but also aware that banning the firm will spark a backlash from drivers and users.

When TfL proposed strict new private hire rules that would have limited Uber’s operations in 2015, more than 200,000 people signed a petition against them and most of the proposals were dropped.

In today’s ruling, TfL raised concerns over Uber’s approach to reporting serious criminal offences and how it obtained enhanced criminal records checks for drivers.

In August the firm was accused by police of allowing a driver who allegedly sexually assaulted a passenger to strike again by not reporting it.

Weeks later the vetting process for thousands of drivers offering the under-fire service was declared invalid, after TfL decided minicab firms had to use its chosen contractor to apply for a DBS check.

It flagged up Uber’s approach to how medical certificates were obtained - for example drivers using an online GP service via video rather than having a check in person as the regulations insist.

The transport body also queried Uber’s use of Greyball software, which could be used to block regulators’ access to the app.

Despite being one of the world’s most popular apps the firm has not been without controversy since it first appeared on London’s streets in 2012.

Earlier this year, a tribunal ruled that the company should treat two drivers as workers and pay them the minimum wage and holiday pay.

It was one of many legal battles, regulatory disagreements and driver strikes that have taken place across the globe – in addition to a string of internal problems.

Earlier this month MPs on the all parliamentary group on taxis claimed the US firm was not a “fit and proper operator” following a string of alleged sex attacks by drivers.

They claimed police figures showed an allegation of rape or sexual assault against Uber drivers is made every eleven days.

The group, chaired by Labour MP Wes Streeting, wrote a letter to TfL urging it to follow the example of other cities and revoke Uber’s licence for operating in the capital.

Earlier this week TfL increased the cost of licences for the largest minicab firms, including Uber, up to £2.9 million, to cover extra enforcement costs.

Mr Khan said: “I want London to be at the forefront of innovation and new technology and to be a natural home for exciting new companies that help Londoners by providing a better and more affordable service.

“However, all companies in London must play by the rules and adhere to the high standard we expect – particularly when it comes to the safety of customers. Providing an innovative service must not be at the expense of customer safety and security.

“I fully support TfL’s decision - it would be wrong if TfL continued to licence Uber if there is any way that this could pose a threat to Londoners’ safety and security. Any operators or private hire services in London need to play by the rules”.

Tom Elvidge, General Manager of Uber in London, said: “3.5 million Londoners who use our app, and more than 40,000 licensed drivers who rely on Uber to make a living, will be astounded by this decision.

“By wanting to ban our app from the capital Transport for London and the Mayor have caved in to a small number of people who want to restrict consumer choice. If this decision stands, it will put more than 40,000 licensed drivers out of work and deprive Londoners of a convenient and affordable form of transport.

Read more How UberEats will be impacted by Uber losing its licence in London

“To defend the livelihoods of all those drivers, and the consumer choice of millions of Londoners who use our app, we intend to immediately challenge this in the courts.

“Uber operates in more than 600 cities around the world, including more than 40 towns and cities here in the UK. This ban would show the world that, far from being open, London is closed to innovative companies who bring choice to consumers.”

Steve McNamara, General Secretary of the Licensed Taxi Drivers’ Association, said: “The Mayor has made the right call not to relicense Uber.

“Since it first came onto our streets Uber has broken the law, exploited its drivers and refused to take responsibility for the safety of passengers.

“We expect Uber will again embark on a spurious legal challenge against the Mayor and TfL, and we will urge the court to uphold this decision. This immoral company has no place on London’s streets”.

However, London Assembly member Andrew Boff said: “This is a hugely damaging decision by Sadiq Khan that will effectively put 40,000 people out of work at the click of a finger.

“The Mayor consistently tells us London is open but in shutting down the operations of an innovative market leader like Uber he has caused immense reputational damage to our city as a global business hub.

“With 3.5million registered users - almost half the city’s adult population - Uber has shown to be providing a hugely beneficial service to Londoners.

“Sadiq Khan has ignored their needs and instead believed the smears and propaganda propagated by Uber’s rivals.”