They continue to use it because there are very few reliable alternatives. The various vegetarian gelling agents do not perform as well. Boiled sweets rarely contain gelatine, nor does toffee as a rule. Chocolate doesnt if it is good quality, nor does fudge....essentialy if you avoid jellied sweets (which almost all contain it) and chews you should be ok.
BSE caused a big panic, but most of the gelatine used by sweet manufacturers comes from places like argentina, where there wasn't any bse to start off with. Also gelatine is a very poor transmitter of prion diseases due to the way it is extracted, so relatively safe even from infected herds.
For alternative, meat free sweets contact the Vegetarian Society