I see that there are three issues here, admittedly connected, but need to be treated separately.
First potentially criminal behaviour , the OP claims that he/she was threatened by this locksmith. This an issue surrounding Criminal Law, as such is not a Civil issue. Report the alleged instance to the police and let them sort it out.
Secondly the issue of “I am now negotiating a further discount on the basis that, if I make a complaint to the Police about Reading locksmith's threats it could hurt their business.” My view is that this is unethical and potentially criminal behaviour on the part of the OP, and he/she should cease this course of action immediately. Irrespective of the alleged action of the locksmith, to try and extort money or services through the use of threats is in breach of Section 21 of the Theft Act 1968.
Finally the OP refusal to pay for worked carried out by this locksmith. As the OP, by his/her own admission did not have a quote prior to commencement of work I see that there he/she has little choice but to the pay the invoiced amount in full. If payment is not made a can see that the OP would be taken to court, which would likely increase the overall liability as costs would most likely be incurred.