Outside Hackney town hall in east London a battle for the soul of Shoreditch is raging as an unlikely coalition of strippers, club owners and a vicar pit themselves against a range of women's groups and disgruntled residents who are fighting to close down the area's sex shops, strip bars and adult cinemas.

Today around 30 erotic dancers, plus bar workers and strip club owners, marched on the town hall to protest against the council's proposal to operate a "nil policy" in the borough, which supporters argue could act as a catalyst for change throughout the city. The night before a dozen or so activists gathered 200 signatures supporting the ban.

Carrying a banner outside the town hall, Jennifer Richardson, a stripper at Browns, one of four clubs clustered around the Shoreditch area, said the clubs were a vital part of the borough's heritage. "If we lose them, Hackney loses part of its character and its edge," said the 28-year-old Oxford graduate. "These places are a seed bed for creativity in the area. Without them, it loses a lot of its individuality."

But Object, a group which campaigns against the objectification of women, argues that the clubs create a "no-go" area for women and foster an atmosphere of aggression that many find intimidating.

Rebecca Mordan, a Hackney resident who runs cabaret nights in the area, said she did not think the creativity of the area would be affected by a ban. "As a resident I fully support the nil policy, because walking past these venues is terrifying. How can women feel safe in there when I can't feel safe just walking past?"

One woman told the organisation that she had been grabbed by the waist and picked up as she walked past one of the clubs, while Amnesty International staff, who work at an office near one of the venues, regularly get taxis home after working late to avoid confrontation, said Anna van Heeswijk, campaigns manager.

"The nil policy would be an important step in combating the sexual exploitation that takes place in places like these," she said. "They are not just a bit of fun. They are often sites of sexual exploitation. They make sexual harassment seem normal and they create no-go areas for women and children who feel unsafe walking past them at night." Consultation closes on Monday and if the council goes ahead the ban will be implemented at the end of January.

Tensions between the two groups are running high. Edie, who did not want to jeopardise her day job by giving her real name, called Object a "fanatical fright group". A stripper in Hackney for 12 years, she argued that she had felt more demeaned working as a PA in the City.

"This is about prohibition and curtailing the rights of adults to decide what they want to do," she said. "I am an adult and I don't want to have to justify myself to a bunch of childish hysterics on some kind of Victorian missionary quest to save the fallen. What about all the Hackney trannie bars and gay cabarets – will the moral police censure them?"

Object argues that lapdancing clubs normalise the idea of women as sexual objects, and pits women, who pay the clubs between £15-40 per night to dance, against each other, leading to competition to attract custom. The dancers are not paid by the clubs and earn money by passing a glass round the men who have watched them dance. They get paid separately for a private dance.

But the women protesting today were furious that they could be seen as victims. They insisted there was solidarity between the strippers at the four Hackney clubs, the dancing happened on stage and a no-touching policy was strictly enforced. Although men did sometimes offer to pay more for private sexual activities, they could be politely rebuffed, or ejected from the establishments, they said. Loretta Landon, 23, was pragmatic about her job. "Frankly, I think the men who come into the clubs are more objectified than we are," she said. "Some of them might have these romantic fantasies about us, but to us they are just walking wallets."

The strippers and their clubs have found support from an unusual quarter. The vicar of the local St Leonard's church in Shoreditch has accused Hackney council of trying to impose a "moral code" on its residents, and argued that the area would be more dangerous if the clubs lost their licence. "I've been here for 27 years and I remember the struggle to get these places licensed in the first place," he said. "They were run by criminals, they were squalid – now they are well-run and brilliantly controlled. Why would we lose control of something that we worked so hard to get under control? The consequences of that worry me deeply."

Club owners argue that if the council pushes ahead, 400 jobs will be lost and girls women forced underground into more dangerous, unregulated situations.