Hi Cocoonfxmedia,
Thanks for sharing the websites.
Yes, it appears you're dealing with a website that's walking a very fine line (arcimedia.co.uk) at the moment. One look at its backlink profile and you can see how over optimized the website's anchor text truly is.
Unfortunately, this isn't uncommon, especially in the digital marketing/web design niche. This proves that Google's algorithm isn't perfect at identifying spammy backlink profiles. It may also be the case that their website has a few authoritative links point to it or another website that 301 redirects to it.
The only real solution is to continue to fight the good fight. I wouldn't be surprised to see this website pop out of the search results at some point in the future due to an algo update or manual penalty. It's a hard pill to swallow, but I would continue to focus on your local SEO efforts (building quality citations, local links, engaging local content, acquiring reviews, etc). It isn't worth jeopardizing the long-term potential of a website, in my opinion, to receive short term rankings.
Best of luck,