I would think the law is more concerned that the UK version of the service, is being paid for by a UK account registered at a UK address, and paying UK fees. It's still being distributed to the UK as far as every financial transaction is concerned.
But I see your point, it's a license issue. I guess Netflix's lawyers should sharpen their pencils, because what you described is already happening, because despite their best efforts, the VPN's have managed to remain ahead.
Glad you see my point. This article is about NF making this even harder, so it sounds like they are on it.
It is never about blocking 100% of things - if your wall is 99.99999% effective then you can claim to have done what you need to do to be compliant with your contract.
But I see your point, it's a license issue. I guess Netflix's lawyers should sharpen their pencils, because what you described is already happening, because despite their best efforts, the VPN's have managed to remain ahead.