Uber has been stripped of its London licence in a surprise move that dealt a serious blow to one of Silicon Valley’s fastest rising companies and sparked an outcry from a coalition of customers, government ministers and drivers at the ride-hailing company.

The firm’s application for a new licence in the metropolitan city was rejected by Transport for London on the basis that the company is not a “fit and proper” private car hire operator.

Uber’s cars will not disappear immediately, as its current licence expires on September 30, and it plans to challenge the ruling by London’s transport authority in the courts, immediately. The firm can continue to operate in the capital – where it has 3.5 million users – until it has exhausted the appeals process, which could take months.

Dara Khosrowshahi, chief executive of Uber, confirmed that the company would appeal against the ruling. He said that he disagreed with the decision, but it was based on past behaviour.

“The truth is that there is a high cost to a bad reputation,” he stated. “It really matters what people think of us, especially in a global business like ours.”

Khosrowshahi, who was brought in to run the firm after a series of scandals, tweeted defending the ride hailing business.

“Dear London: we r far from perfect but we have 40k licensed drivers and 3.5mm Londoners depending on us. Pls work w/us to make things right.”