“Oh there he is!” said Dame Margaret Hodge, approaching a portrait she has never seen face to face before. “It is my old grandad … how amazing!”

The sitter, with a distinctive white moustache and blue eyes, was Wilhelm Hollitscher, a former chief engineer of the Danube Steamboat Shipping Company who fled the Nazis and was soon interned by the British in camps with many thousands of so-called enemy aliens.

The portrait was bought in 2016 by the Ben Uri Gallery, a charity that tells the stories of Jewish and immigrant artists. It had no idea who the sitter was until one of Hodge’s sisters spotted it recently and got in touch.

On Thursday Hodge, a Labour MP who has been vocal in her condemnation of how the party deals with antisemitism, saw the painting up close for the first time at the 12 Star Gallery in London and spoke of the unhappy family memories its revelation had sparked.

Margaret Hodge in front of the painting of her grandad Wilhelm Hollitscher. Photograph: Ben Uri Gallery

Hollitscher fled to Britain from Austria in the late 1930s, leaving behind a wife from whom he was separated. “It is a horrible, horrible story,” said Hodge. “His wife, we’ve got photographs of her, is really so beautiful. She didn’t come out. She was 55 and she thought they wouldn’t touch people who were really old.”

The family have letters in which Hollitscher’s wife, Marianne, wrote about being forced into a smaller flat with a higher rent, having to wear the Star of David and then being sent a big tax bill.

“The last thing is she is taken to a camp in Lithuania and she was shot. She never made it. We’ve got the last letter she wrote, to my uncle. It is so poignant. She says twice in it: ‘Don’t forget me completely.’”

Her husband did make it to Britain and Hodge has read diaries he wrote describing how hard it was to fit in. “He doesn’t speak the language so he feels very isolated and depressed,” said Hodge.

In 1940 Winston Churchill issued a directive to “collar the lot”, and around 27,000 “enemy aliens” were rounded up and forced into internment camps.

Hollitscher wrote of a police officer knocking at his door and giving him an hour to get ready. A frail old man, he ended up at Huyton camp on Merseyside and hated it.

“They were badly treated,” said Hodge “There was no food, he slept on straw for the first night and they were mixed up so there were Nazis there … there were fights between the ‘enemy alien’ Jews and the Nazis.

“You just think: what on earth were the Brits thinking? At the very end in his diaries he writes about how he thinks the reason they were locked up is because there is antisemitism at the higher echelons of British society. Why would they lock up a 65-year-old sick Jew who has escaped from Vienna?”

There was some relief at Huyton. There were music evenings and lectures, and Hollitscher evidently struck up a friendship with the artist Hugo Dachinger, who painted his portrait on a copy of the Times newspaper.

Hodge thinks her grandfather was released early from the camp because of his frailty. He died in 1943 aged 70.

Reading his diaries, she said, she got the sense of a man who loved music and politics. “There is a lot of sadness; moving passages about feeling like the outsider.”

The portrait has gone on display as part of an exhibition telling the stories of artists who fled the Nazis. There are works by Kurt Schwitters, Lucian Freud, Josef Herman, Eva Frankfurther and Frank Auerbach, who was sent to England as a young child in 1939 and whose parents died in the concentration camps.

Auerbach went to Bunce Court, a progressive boarding school for Jewish refugees, and went on to become one of Britain’s most celebrated postwar artists.

Hodge, whose parents fled Germany in the 1930s to Egypt, has been the MP for Barking since 1994 and lately has been fiercely critical of Jeremy Corbyn. In July last year she called him “an antisemitic racist”, in an angry public confrontation in parliament. She wrote in the Guardian last month of how she believed things were getting worse.

• Art-exit 1939 – A Very Different Europe is an exhibition staged by the Ben Uri Gallery at the 12 Star Gallery in Westminster.