Nestled in the heart of Soho in central London sits a small, unimpressive-looking venue. Push your way through the double doors beneath a seedy flashing neon sign, however, and you encounter a plush world of opulence, red velvet curtains and art deco mirrors.

Until recently, the crowd filling the dance floor was as likely to be clad in baseball caps and chains as burlesque basques and feathers, but Madame Jojo’s – home to some of London’s most diverse nightlife for more than half a century – has now shut down for good.

News that Westminster council had revoked its licence this week, following an incident outside the club, has been greeted with disbelief, both by those who have hosted nights at the venue for years and the many loyal punters who flocked there every week in search of the quirkier side of London’s club scene.

Supporters of Madame Jojo’s say that the closure is part of the council’s drive to gentrify Soho, which is robbing the area of its unique atmosphere and heritage in the process.

The venue, known to many as the home of burlesque and cabaret in Soho, hosted some of the earliest gigs played by bands such as the xx and Anna Calvi, and Lorde played her first UK show there. It was also the focal point of Michael Winterbottom’s 2013 film The Look Of Love, in which Steve Coogan plays Paul Raymond, the Soho porn baron who owned and ran Madame Jojo’s in the 1960s.

The incident that prompted the council to close the venue took place on 24 October, when its bouncers became involved in a dispute with a customer. The police report says members of the security team and their taxi operator violently assaulted the man after a verbal altercation. The man initially left, but returned and threw bottles at the bouncers and members of the public. The bouncers responded by attacking him with baseball bats.

The police report concluded with a call to suspend the venue’s licence pending full revocation.

Madame Jojo’s subsequently changed its manager and bouncers for a team approved by the council, but it was not enough to save its licence.

Marcus Harris, who co-ran the now infamous White Heat night at the venue, hosting up and coming bands every week for more than 10 years, said the closure was a real loss for Soho.

“There has been a venue in that place since the 1950s and it was given that name in the 1960s,” he said. “It’s a huge part of Soho’s history. Even the way the venue is decorated, there is nothing else like it in London. You can go there and see bands, you can see DJs, but you can also see cabaret and burlesque all sorts of unusual nights under one banner. It’s like a community of fringe culture.”

Harris said it was the first time in his decade at Madame Jojo’s that anything violent had happened, and that he could vouch for the venue’s previously good relationship with the council.

He believes the speedy decision to close the venue permanently was indicative of the council’s negative attitude toward the few older, late-licence venues that still remain in the heart of Soho, an area “now in the clutches of gentrification”.

“In my opinion, it seems that the council just used the incident as a good excuse to take away the licence,” he said. “It’s one of the few places left round there which has a 3am licence, seven nights a week. If you look at the way the area is changing, they clearly don’t want a late night drinking presence anywhere in Soho anymore. They want to make Soho about families – shopping, going out to eat, going to the theatre. The bars shut at 11 and you’re home by midnight.”

The future of Harris’s White Heat is now uncertain. “Crossrail already took at least five venues in the area and there is definitely a feeling that older, late night venues are being severely punished for things that might have been overlooked in the past … It’s bizarre how radically the area has changed in the past few years … It looks largely the same but it’s had a lot of its history gutted.”

Alexander Parsonage, the artistic director of the Finger in The Pie theatre group, which performed a cabaret show at Madame Jojo’s every month for the past six years, said Madame Jojo’s was unique.

“Jojo’s brought together gay culture and burlesque culture with mainstream music and club nights. Everyone went there. It was a rare place that brought together all these worlds.

“The whole time we’ve been there, there’s been a hip-hop night on after us, so for years there’s always this wonderful moment at the end of our show where you have a roomful of people in suits and corsets suddenly meeting these b-boy guys with their baggy trousers and baseball caps and staring slightly over a cultural void at each other, yet just carrying on dancing and having a great time. Jojo’s is the only place I know where that would happen.

“The closure of Madame Jojo’s plays to the weird gentrification that’s happened in Soho over the past 10 years. For 400 years its been the gloriously seedy underbelly of London, where some of the most interesting subculture has thrived, and yet in the last 10 years Westminster council seem hellbent to destroy that, to gut its character completely and turn everything into high end retail.”

A statement by Tim Mitchell, the chairman of Westminster city council’s licensing committee, said: “On 24 October, an organised assault with injury took place – involving staff from Madame Jojo’s and Escape Bar – raising serious questions about their management.

“Our licensing sub-committee has to consider the safety of the public and after considering evidence from a number of interested parties, including the police, it was concluded that the licences for both bars should be revoked.

“The fact that these events are the subject of an on-going criminal investigation tells you how serious the assault was – and also means we are unable to say any more at the moment.”

Madame Jojo’s said they had no comment.