»A sex cinema where a town hall official was touched on the thigh and saw men pleasuring each other, is still open a month after the proprietor handed over his licence, a neighbour claims.

Fantasy Video, in Old Street, Finsbury, was due to face an ­Islington Council licensing committee on Monday after a council official said he “observed six men standing in the cinema masturbating and other men masturbating each other” during an undercover visit.

Rather than go before the committee, the proprietor gave up his licence on October 18 – but a resident who previously complained he could hear sexual activity through the walls says nothing has changed.

They said: “Nothing has been done about the issue. Although the manager has taken off the sign, the business and the disturbance it causes has not changed a bit.

They added: “This is a disgrace and should be dealt with and stopped.”

Cllr Paul Convery, Islington Council’s executive member for community safety, said: “I believe we are about to rigorously enforce changes there. Although he has handed his licence in it hasn’t yet lapsed and the licensee is trying to squeeze the last few days out of it.

“It’s not great for people living nearby, but with a bit of patience Fantasy Video will be no more.”

At the meeting, two other premises had their licenses taken away.

At Abcat Cinema, in Caledonian Road, King’s Cross, which is not a licensed sex establishment, an officer found “three men standing at the back masturbating and two men in the back row with one masturbating the other” during a covert visit.

Meanwhile at Oscars, in nearby Northdown Street, an officer found “men kissing and fondling each other” while he was also sold an x-rated DVD called Meet the Barebackers II.

Cllr Convery added: “People might say this is the council moralising, but it really isn’t. There are licensing conditions for these sorts of places and the licence has been breached.

“What people get up to in private is up to them, absolutely, but this is not in private – it’s a public place in a high street and if they breach lawful conditions, consequences follow.”