I'm not sure that was the main factor in their decline. I think it was more that they were internally divided over what direction the party should take. The members that wanted the full-fat fash street violence left for the EDL. The remnants weren't able to effectively compete with UKIP's money and ground game at elections.
Is the British National Party an actual political party? If so, it does not seem reasonable to me that they are banned, unless they ban all political parties.
Favoring some political parties over others should not be allowed.
> Combat 18 is an openly neo-Nazi group that is devoted to violence and is hostile to electoral politics, and for this reason Sargent [the founder of Combat 18] split decisively from the BNP in 1993.
Al Muhajiroun; British National Party (BNP); English Defence League (EDL); Hizb ut Tahir; Muslim Public Affairs Committee; National Action
Some of these are proscribed organisations in the UK, eg https://www.gov.uk/government/news/national-action-becomes-f...
The problem is that local branches go much further, and ban many more people.