Gazza
Have you thought about pricing this guy off your round.
If it was me I would tell this window cleaner that because he is undercutting you and telling some of your customers porky pies that you will now be charging your customers £1.00 per house per clean.
Before you think I've gone completly round the bend listen to these reasons why I think it would work.
1 He works with 2 other people so they are going to have to clean 3 houses to every one you clean just to make the same amount of money that you do.
2 If he is a legal window cleaner and he employs these people then he has to pay them the minimum wage plus national insurance contubutions which would work out at £6.00 per hour per man so at £1.00 per house he is going to have to clean 12 houses per hour to break even without making a penny for himself
3 If he is not legal and you tell him you intend to inform the local DSS and Tax office to check him out. He will leave your area very quickly. I would also do this because if he is illegal its your business going down the drain.
4 If he is legal then it comes down to who can last the longer, but you have the advantage.
Ideally you should also be working in other areas of town where this problem does not exist and you can earn a decent amount of money.
I have done this in the past and its worked for me.