I think your friends needs to give this tenant written notice to vacate the property. Also she should be prepared to start legal proceedings to obtain an eviction order.
From what you say, this tenant sounds like trouble. This woman can now remain in the property for as long as she wants, eviction orders can take months to come through. Your friend cannot march in and remove the tenant or her belongings, if she does this, then she would be breaking the law.
As a landlord myself, I like to use an agency to find me the tenant, therefore, credit checks can be obtained and references. They take 10% plus VAT for this service, but it can help prevent situations like your friend is experiencing.
Also regarding deposits, since April 2007, tenants deposits must be placed in a Tenancy Deposit Scheme. The idea is that disputes over deposits can be resolved fairly, preventing landlords from just pocketing their tenants deposits. You are no longer allowed to hold the tenant's deposit.