I think the authorities have to fix the problem they have and not over-react.
The pilot was displaying in the wrong place with too few safety margins. It's that simple.
They have a 5500 ceiling because of Gatwick who are at the moment experimenting with varying traffic over Sussex day to day (presumably because of airliner noise). Perhaps they are a little restrictive with the ceiling, given they don't have a stable pattern over the county.
Pilots from Shoreham are during the summer buzzing up and down the coast to Brighton - the place where everyone lets go - and of course that culture has gotten to them. I raise my eyebrows at pilots doing manoeuvres over Brighton with seemingly little oversight.
Control is not something I associate with pilots flying our of Shoreham. But that could be changed.
Alternatively, putting the show over the water at Lancing might be good for everyone and successful.