A society of residents funded by the council could “destroy Soho’s reputation on the international stage” as London’s entertainment district by ferociously objecting to all new bar and restaurant licences, operators in the area have said.

The Soho Society, a group of residents established in 1972 aimed at “preserving the character of Soho”, voted in its AGM on Thursday for a new licensing mandate, meaning it will challenge all new applications for bars and restaurants in the area, including renewals of existing licences. It will also object to any venue that wishes to open beyond “core hours”, which Westminster council decrees end at 11pm.

The society claims the area in central London has seen an intensification of nightlife and unacceptable noise, as well as crime and litter caused by a proliferation of late-night revellers.

The new mandate means it will be very difficult for businesses to open or expand in the area. The society is part-funded by Westminster city council and has a formal consultative role in relation to all planning and licensing applications in Soho.

Rupert Power, the owner of Sophie’s, a steak restaurant, and the underground jazz bar Jack Solomons, both on Great Windmill Street, chairs the Soho business alliance, which is made up of 150 small companies. “Soho is renowned internationally for its creative activity and it is a melting pot of socialising,” he said. “It would be a shame if that international reputation was trashed by a few residents.” He said other cities such as Paris and New York were able to maintain more of a late-night culture than central London.

Some members of the Soho Society said they felt intimidated into not voting against the mandate, because an email said any votes would be seen by the chair of the society.

“Every time they [the society] contest a licence, no matter if it is for spurious reasons, the council looks at it,” another bar owner, who is also a member of the society, said. “It costs nothing for them, but thousands for us. Why have a blanket policy to say ‘no’? But, they say they can see what we vote, and I don’t want them to retaliate against me by coming after my licence. They are mafia-like. So I won’t vote.”

Brian Hannon, who owns the Super 8 restaurant company which oversees the Thai restaurant Kiln on Brewer Street and the Michelin-starred Mountain on Beak Street, said it was “shocking” the society would be able to see how people voted.

He said: “But they always have objected to all new licences. The more extreme they go the more silly and unreasonable they look.”

A report this week by the former cabinet minister Alan Milburn said a lack of hospitality jobs was contributing to high youth unemployment in Britain. It pointed to a halving of vacancies in the hospitality industry over the past four years alone. Analysis shows Britain has the third-highest rate of 16- to 24-year-olds who are not earning or learning among rich European countries.

Power added: “It is strangling small businesses, meaning there are less hours and jobs for young people to work. I really worry for young people. To have a minority be in a position of stifling growth that is funded by the council is not ideal.”

The society’s methods came under question last year when it objected to a licence for a new gin bar and distillery, claiming it could be a fire hazard. It found an expert who said the gin distillery could cause explosions, but this was refuted by the London fire brigade at the hearing. Though the objection was overturned, the distillery had to shoulder thousands of pounds in legal fees and still has yet to open. The full legal costs to the distillery were £44,000. The Soho Society had to pay £27,000 because it argued it was in a precarious financial position.

“They should have had to pay all of it,” the owner of a neighbouring business said. “If they want to make vexatious complaints they should risk the costs associated with it. Why should businesses have to pay?”

Philip Kolvin KC, a planning lawyer, said the mandate would cover “pretty much the whole gamut of licence applications, so that rather than promoting innovation and diversity, it stymies it”. He said this meant licensing applications could be delayed by local authority hearings, while legal costs spiralled and development contracts faced expiry. “Even where the authorities such as police, licensing and environmental health can envisage no harm,” he added.

Power has faced difficulties because of the society. His club only has a licence until 1am, despite being a historic venue where the Rolling Stones played and people used to party until dawn.

“The downstairs club used to be open until 4am, but the council will only grant me a 1am licence. I will be applying again in the autumn to let me open until 2 or 3. I’ve applied twice, and it is frustrating when you are hit with a barrage of objections,” he said.

He added: “On an international stage it’s a bit sad we have to shut at 1am. It could destroy the West End’s reputation.”

The Soho Society is estimated to represent about 10% of the district’s residents. Power said he believed the membership skewed older. “They need to find their young spirit,” he said.

Kolvin added: “It would represent great progress if residents’ associations could make themselves part of the solution, rather than setting their face against change and development. There is a better way to promote Soho as a world-leading centre of culture, arts and entertainment, as well as a great place to live.”

A spokesperson for the Soho Society said: “Our licensing mandate reflects our concerns about cumulative impact – see Westminster city councils’ Statement on Cumulative Impact and the Licensing Act 2003.

“Changes to our planning mandate are about light pollution and encouraging virtual queueing to keep the pavements clear.

“To our knowledge, no member has raised these concerns with the Soho Society or any member of the exec committee. The Soho Society has never initiated a review of anyone’s licence.

“In the past the Metropolitan police and the council have initiated review proceedings when serious crime has taken place in a premises but the Soho Society never has. Even if a review was initiated the decision would be made by the council.

“We have no data on the age of our members, there is no requirement to be a resident, the number of residents in Soho is also uncertain.”

Caroline Sargent, Westminster council’s deputy leader and cabinet member for enforcement, said: “The council has always sought to strike a balance to protect Soho’s status as a thriving international centre of culture and hospitality, while also ensuring it remains a pleasant and attractive place to live for its residents.

“In determining applications, the council takes into account all representations, including from the applicant, authorities such as the police, and resident groups like Soho Society, and each case is decided on its own merits.”