I'm not questioning your motives. What else would you do except quitting the PhD and this way discarding three years of research...
I'm more startled that this seems to be considered as normal. As a foreigner you somehow expect certain standards of a country like UK regarding the working conditions. Not everybody has a partner or parents who are willing to finance them for so long. If it is just writing up, it is probably managable but usually people don't need one year to write up. As I already said, why do other countries manage that so much better? Of course countries like Denmark or Netherlands are much smaller than Germany or England but still....

Is their a debate about this in the UK (remember some protests regarding fees a few years ago)?

I truly can't believe that a majority of students accepts these conditions. I also knew some PhD students who had to write their thesis while getting social support of the state but using up all your savings (even your parent's savings), working 24/7 with no private life for a year or even end in high debt is another level.
I don't understand why they have such a fucked up system, when countries like the Netherlands, Sweden, Denmark, Norway and so on manage to have a tuition-free and fee-free education (neither for undergrad, nor postgrad degrees) and pay 100% positions with at least 1400 pounds a month (usually even increasing with every year of your PhD) for 4 full years. Somehow other countries seem to handle this.
We have quite a lot of debate about this in Germany and there are more and more 65% positions coming due to the public pressure, but the UK system sounds so much worse.
Considering the job perspective for Post Docs in academia and industry it is almost amazing that they find people who actually do a PhD in Humanities or other risky subjects.

You guys should definitely go abroad for a PhD :) Living in the Netherlands right now and they sound much more positive about their PhDs and actually enjoyed this time, while the average UK student seems to describe it more like a period of destitution in a "what ever doesn't kill you makes you stronger" way :D

Really hope they'll change something about that. That is definitely unacceptable.

But I agree with you TreeofLife, not really something you could do about it when you are already in the system. Quitting is no option...

Is this common in UK or was it just bad luck that you couldn't make it in 3 years? I guess most people don't have enough savings to finance themselves for a whole year (especially as you have to pay tuiton and fees too I guess). I also think it's a matter of principle to not use your savings to conduct research for a professor.

ok

If the staff in the group is experienced and the labs look good, why not? Was their a special reason for closure/re-opening?

I feel really sorry for you. Sounds a bit lunatic that not even high impact journals like nature comm or biotech guarantee some funding. Maybe the proposal itself can be improved an you just didn't present it in the optimal way? However, this could also be a result of the tons of proposals they receive for grants. There is probably always someone slightly superior in terms of publications. Topic 2 sounds like a great way to prevent any kind of discovery :D

I think it is really a pity that you rely so hard on the references. Even for PhD positions they sometimes demand 3 references.Brings you in a position, where you have to kiss ass all the time because every reference counts. If you had a bad relationship to your supervisor and he is not willing to recommend you then you are sometimes pretty much fucked...

Sadly I have no good solution to this. Try to talk to your supervisor again and tell him that this is unfair as you won't find something new without his reference....it will look really suspicious if you have no recommendation from your PhD supervisor, no matter if you find other references or not. It is as if he/she would blackmail you..."work for me or in an institution I approve or you won't get a reference"

Well, there are of course still promising fields like computer science, where know how is needed. Big Data is a hot topic at the moment and I heard for instance that many physicists try to get in there after their PhD in less applied fields like particle- or astrophysics. However, this is not representative and does not really show what the average PhD student can do.
The more programming you do, the better. People in bio-, neuro-, whatever-informatics usually find something appropriate. Significantly harder if you hold a PhD in humanities, protein biochemistry or physical chemistry) ;)