Larsman, probably because the UK AIP (ENR 1.6.2) says:
3 Transponder Failure
3.1 Failure before intended departure
3.1.1 If the transponder fails before intended departure and cannot be repaired pilots shall:
(a) Plan to proceed as directly as possible to the nearest suitable aerodrome where repair can be made;
(b) inform ATS as soon as possible preferably before the submission of a flight plan. When granting clearance to such aircraft, ATC will take into account the existing and anticipated traffic situation and may have to modify the time of departure, flight level or route of the intended flight;
(c) insert in item 10 of the ICAO flight plan under SSR the letter N for complete unserviceability of the transponder or in the
case of partial failure, the letter corresponding to the remaining transponder capability as specified in ICAO Doc 4444, Appendix 2.
3.2 Failure after departure
3.2.1 If the transponder fails after departure or en-route, ATS Units will endeavour to provide for continuation of the flight in
accordance with the original flight plan. In certain traffic situations this may not be possible particularly when the failure is detected shortly after take-off. The aircraft may then be required to return to the departure aerodrome or to land at another aerodrome acceptable to the operator and to ATC. After landing, pilots shall make every effort to have the transponder restored to normal operation. If the transponder cannot be repaired then the provisions in paragraph 3.1.1 apply.
PS. I see nothing in the "Rules of the Air", as defined in section 2 of the ANO that precludes such flight.