The battle of Portobello Road

The Victorian charm of Portobello Market has graced films from Bedknobs and Broomsticks to Notting HiIl, propelling it towards the top of the London tourist circuit, making it one of the most desirable areas to live and work in the capital.

There are cheery chaps on stalls crying "apples and pears". Second-hand book traders co-exist alongside chichi coffee shops and terribly cool bars. It all seems rather delightful.

But the picture of urban perfection is not what it seems. For the market traders are engaged in a bitter war that pits them against trendy new arrivals and threatens to shape the future of the market. This month after a battle involving a QC, dozens of Freedom of Information Act requests, a district auditor and an independent consultant's report, Kensington and Chelsea borough council has been forced to promise the traders £750,000 compensation after overcharging them for collecting their waste for up to 18 years.

The street sellers are calling it Garbagegate. They say that for years they have been charged more for waste disposal than the shops and bars on Portobello Road. The fact that they are being charged more, they add, shows the council favours wealthy corporate investors over the "ramshackle" nature of the stalls, and would be very happy to see them gone.

"Stallholders feel the council prioritises wealth investors and corporate brands over our rough-and-ready approach to commerce," said Marion Gettleson, who runs a small antiques shop on Portobello Road. "If it isn't new and it isn't slick they are not interested."

Originally a food market, antiques dealers began to arrive in Portobello Road in the 1950s to give the area its unique sense of history and variety. By the 1970s the market's atmosphere and charm had made it a world-famous tourist attraction, helped in no small part by an appearance in the Walt Disney film Bedknobs and Broomsticks (1971).

The story of recent years, however, is one of simultaneous decline and gentrification – not helped, the stallholders say, by the attitude of the council.

Flamboyant millionaires and developers have bought much of the land, supplanting established small-time dealers with coffee shops and boutiques.

Today, the market is increasingly derelict during the week, the stall markings on the road encompassing barren spaces. Snazzy new shops such as Progreso and American Apparel have sprung up, while established and eccentric local stores have been forced to move out. A contemporary art gallery, Apart, and an ethnic clothing and gifts store, Culture Shack, were forced to close down two years ago.

Some of the obstacles the traders face today seem almost trivial, but have serious consequences nevertheless. For example, the closure of a large underground Victorian toilet facility on nearby Talbot Road has, the street sellers say, proved an irritation for shoppers and stallholder alike. Though four new overground chemical toilets have been erected in their place, they have no washing facility and simply cannot cater for the 60,000 shoppers that arrive on a Saturday afternoon.

Electricity is another problem. The northern end of the market has either minimal or no electricity supply at all, because very few electric bollards have been erected there. When, two years ago, the bollards at the southern end of the market had to be rewired, the street sellers were forced to produce the funds – even those at the northern end.

Transport to and from the market has become increasingly difficult, meanwhile. The cost of parking has risen in line with the rest of London, but the Mayor's congestion charge, over which the council has no power, has proved even more harmful to market trade. Though the market sits just outside the congestion charge zone, its close proximity means those driving in from the west face a £8 surcharge on their shopping.

But there is one unstoppable force strangling street sellers more than any other – competition from chain stores with which they struggle to compete.

The development of a Sainsbury's on nearby Edgware Road, together with the opening of a Tesco Metro on Portobello Road itself, means the fruit and vegetable stalls – for decades, the linchpin of the market – are being priced out of existence.

One market grocer described the choice facing him in stark terms – "diversify or die".

As she looks ahead, Ms Gettleson is filled with foreboding. "Our local market is the historic heart of our community, but it is being slowly strangled by a deluge of outside investors who feel no solidarity for the people who live here," she said.

"The impact of all this money flooding in is to push rents up for everyone, so that only the very rich can afford to trade here. The annual rent for a small shop like mine was £40,000 10 years ago. Now it's £100,000. So the street, rather than serving those who live here, becomes a playground for the wealthy."

From behind a dazzling selection of local and international fruit, Cheryl Devlin, 50, agrees. "We simply cannot compete with the sort of money that these investors are bringing in", she said.

She says she is the fourth generation of her family to ply her wares in Portobello Market. "When you realise the one group who are meant to be on your side, the council, the very people who collect your tax after all, have been ripping you off for years, you begin to give up hope", she added.

A council spokesman said it was committed to the survival of small shops, adding that they have implemented 46 of the 54 recommendations of a Retail Commission report published last year. The report, whose authors included the restaurateur Sir Terence Conran, outlined measures to help smaller retailers survive.

Indeed, the council says that relations with street traders have improved in the wake of the recent settlement. Many of the most severe threats to the market's survival do appear to be beyond the council's control.

Nevertheless, thousands of local residents are due to receive a newsletter from local Liberal Democrats this week, highlighting the consequence of Garbagegate. The newsletter will ask questions about the silence of the sitting Labour councillors in Colville, the ward in which Portobello Market is situated, one of only three Labour wards on the Tory-dominated council.

Ms Gettison said: "£750,000 is not good enough. This is about more than money. I've had to spend three years doing what councillors are paid to do. The street sellers of the market are the heart and soul of the community, but we've been ripped off and then given no help at all. It's like living in a one-party state."