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UPDATE 5-'Unfit' Uber stripped of London license

* London declines to renew Uber license

* Uber to appeal, can operate during process

* London mayor supports decision

* Graphic: http://tmsnrt.rs/2jQOqKD (Updates petition signatures)

LONDON, Sept 22 (Reuters) - London deemed Uber unfit to run a taxi service on Friday and stripped it of its license to operate from the end of next week in a major blow to the U.S. firm and 3.5 million users in one of the world's wealthiest cities.

The capital's transport regulator said the Silicon Valley technology giant's approach and conduct was not fit and proper to hold a private vehicle hire license and it would not be renewed when it expires on Sept. 30.

Uber, which has 40,000 drivers working in the capital, said it would contest the decision. Regulator Transport for London (TfL) said it would let Uber operate until the appeals process is exhausted, which could take months.

"Uber's approach and conduct demonstrate a lack of corporate responsibility in relation to a number of issues which have potential public safety and security implications," TfL said.

Specifically, TfL cited Uber's approach to reporting serious criminal offenses, background checks on drivers and software called Greyball that could be used to block regulators from gaining full access to the app.

"Transport for London and the Mayor have caved in to a small number of people who want to restrict consumer choice," said Tom Elvidge, Uber's general manager in London. "We intend to immediately challenge this in the courts."

An online petition against the decision had gathered more than 200,000 signatures within five hours.

'SAFETY THREAT'

The loss of the license comes after a tumultuous few months for Uber, including a string of scandals involving allegations of sexism and bullying at the San Francisco-based start-up that forced out former CEO and co-founder Travis Kalanick.

Uber, which is valued at about $70 billion and whose investors include Goldman Sachs, has faced protests around the world for shaking up long-established taxi markets.

The taxi app has also been forced to quit several countries, including Denmark and Hungary, and faced regulatory battles in multiple U.S. states and around the world.

London's traditional black cab drivers have attacked Uber, saying it has undercut safety rules and threatened their livelihoods. Uber has been criticized by unions and lawmakers too and been embroiled in legal battles over workers' rights.

London police also complained in a letter in April that Uber was either not disclosing, or taking too long to report, serious crimes including sexual assaults and this put the public at risk.

Of the 154 allegations of rape or sexual assault made to police in London between February 2015 and February 2016 in which the suspect was a taxi driver, 32 concerned Uber, according to the capital's police force.

Uber said on Friday its drivers passed the same rigorous checks as black cab drivers, it has always followed TfL's rules on reporting serious incidents and it had a dedicated team that worked closely with London's police.

London Mayor Sadiq Khan, a Labour politician who has criticized Uber in the past, said he backed the decision to reject its application for a new license.

"It would be wrong if TfL continued to license Uber if there is any way that this could pose a threat to Londoners' safety and security," he said.

HATED BY CABBIES LOVED BY USERS

Drivers of London's black cabs, who have snarled up the city's streets in protest at the app over the last few years, welcomed Friday's decision.

"Their standards are not up to scratch," said 71-year-old Walt Burrows, who has driven a black cab for 39 years. "The black cab is an iconic part of London. What you get with a black cab is a metered fare and you know you're safe."

Uber is likely to come under more fire next week when it appears in court to appeal a verdict that granted two of its drivers rights such as the minimum wage, the latest "gig economy" battle between firms lauding the flexibility enjoyed by self-employed drivers and unions accusing them of exploitation.

Uber has, however, announced a series of changes over the last few months to improve conditions for its drivers, including the introduction of in-app tipping and plans to increase some fees.

Alongside Uber's drivers, some of London's 3.5 million registered users expressed concern as to how TfL's decision would affect their lives.

"It will definitely impact my life," said 43-year-old event planner Rimi Char, who uses the app at least once a week. "I have got used to the ease and cost effectiveness of using Uber and I've always had positive experiences."

One of Uber's British competitors in London, Addison Lee, is also awaiting a decision from TfL about a longer-term license. The company declined to comment on Friday.

(Additional reporting by Michael Holden, Kylie MacLellan, James Davey, Elizabeth O'Leary and Elaine Hardcastle; editing by Keith Weir and David Clarke)