Is there any place in Piccadilly in London where chips are sold wrapped in newspaper?

Nope. Haven't seen it anywhere in London for years. It's died out more or less completely on the basis of food hygiene. While not strictly illegal in the UK, I believe many local councils take a dim view of it. There's also the fact that many chippies are now run by immigrants, especially in London, where IMO Greek cypriots make the best chips. They never really bought into the culture of newspaper wrapping in the first place.

By the way, there isn't an area called Piccadilly. There's a place called Piccadilly Circus and a street called Piccadilly, but the latter is hardly the sort of place where you'd find a chippy. I expect Fortnum & Mason and the Ritz would take a very dim view of a takeaway next door.

They're not allowed to sell them in newspaper anymore but some places have special paper printed to look like newspaper thats safe to use on chips. They did it at a restaurant I worked at in Euston station. I'm not sure but I think harry ramsdens might do something similar, but its not really an authentic fish and chips experience.

Yes in Angelas Ashes

Carnivalist is right, something to do with the ink seeping into the food.