The Koranic verses are ringing out from a stereo on Hamza Myatt's market stall on Barking's pedestrianised high street.

The 36-year-old ginger-haired and white-skinned Muslim convert swapped his life as a financial adviser in South Wales to proselytise for his new faith in the outer reaches of East London three weeks after the 9/11 attacks. He now spends market days noisily selling Islamic literature.

A few feet away from Mr Myatt's stall, at a mobile snack bar selling tea and bacon butties, where customers are trying on keffiyeh scarves and checking through DVDs on Islam for children, stands a furious Derek Carlton.

Pointing his finger towards Mr Myatt's loudspeaker, now broadcasting an imam's sermon, Mr Carlton, 46, a maintenance engineer, says: "Yes, I will vote BNP and that is why. I have no problem with other religions. What I have a problem with is when it changes the character of your town and you're not allowed to say anything about it.

"The BNP is saying what no one else will. Slowly but surely, people like me are being pushed aside in favour of outsiders. You can't tell me it's racist to be annoyed that my children can't get a council house in the same place as their parents because they've all been handed over to Africans and Muslims?"

Welcome to Barking and Dagenham, the former industrial heartland of the white working classes, now a bellwether for the rising fortunes of the far right.

It is far from unthinkable that the citizens of this London borough will wake on 7 May to find the British National Party running their council. If its confident prediction that it can more than double its contingent of 12 councillors comes true, a party whose leader, Nick Griffin, once denied the Holocaust and said "Hitler went a bit too far" will find itself in charge of services to 165,000 people and an annual budget of £200m.

This weekend, hundreds of BNP supporters are expected to descend on the area. In an email, Mr Griffin appeals for as many members as possible to target the constituency over the weekend. "A victory in Barking and Dagenham will benefit every region and branch in the country, as a breakthrough of that magnitude will cause a political earthquake and publicity frenzy," he writes.

Margaret Hodge, the Labour minister and incumbent MP against whom Mr Griffin is standing for Parliament, is calling for supporters to come out in force to match the BNP's canvassing effort. Mr Carlton, one of an estimated 5,000-10,000 voters in Barking and Dagenham whoare BNP supporters, is the embodiment of a radical change in the far-right party's fortunes in this area.

In the 1997 general election, the BNP mustered just 894 votes, or 2.7 per cent of the vote. In the 2008 London Assembly elections, the BNP vote in some wards hit more than 38 per cent.

Alongside Stoke-on-Trent council, the BNP has made no secret of the fact that securing power in Barking and Dagenham is its priority. Mr Griffin has stated that his candidacy is designed to allow him to take the "flak" from anti-BNP campaigners while his activists focus on the "real prize" of the council.

The Independent understands the party is close to fielding a candidate for each of the 51 local authority seats with the aim of securing the 14 extra councillors it needs to seize its "prize". It could take as little as 1,000 votes in six wards to hand power to the BNP.

The roots of this grim transformation from a protest vote to candidate for power lie in what its opponents admit has been a "perfect storm" of issues that pander to the extreme right.

Against a backdrop of deindustrialisation which has seen the powerhouse of the Ford Motor Company at Dagenham wither to less than 5 per cent of its previous workforce, the area has experienced considerable immigration with some wards going from a ethnic minority population of about 5 per cent to up to 35 per cent since 2000.

As one opponent put it: "The BNP are like winter potholes. They slide into a gap in our communities and wait for bad weather." One such political "pothole", repeated to The Independent by a large number of residents, is the notion that the borough's influx of migrants is politically-inspired. A Government scheme to persuade immigrant families in inner city London to free up council housing by subsidising a move out to cheaper areas such as Barking and Dagenham resulted in 30 families moving in – seven were white, nine were Asian, nine were black and five did not specify their ethnicity. The maximum subsidy was £16,000. Most received about £4,000.

This has not stopped the BNP running a campaign it calls "Africans for Essex", stating that the borough has been flooded with immigrants paid £50,000 a time to slant the electoral arithmetic of Barking and Dagenham in favour of the ruling Labour administration, which has 34 seats on the council.

It is a fallacy that the extremist party continues to peddle, taking pictures such as Mr Griffin posing by a banner advertising a Nigerian Islamic group.

Eddy Butler, the BNP national election organiser until he stepped down last week, added: "The Labour Party has deliberately transported African migrants into this part of Essex to create an electorate willing to vote Labour." His words appear to strike a chord on the streets of the constituency.

The lack of social housing is a major problem locally and a key electoral issue. Margaret Thatcher's right-to-buy policy cut the housing stock in an area which includes the vast Becontree estate, the world's largest public housing project. Successive Labour governments have stymied the development of new homes, leaving a council waiting list of 11,695.

Last month, a scheme was announced to provide 145 new homes in two years – the first new council homes in Barking for 25 years. Such has been the inertia of central government, the local Labour Party has distanced itself from its national policies. Phil Waker, the Labour councillor in charge of housing, said: "New Labour has been complacent – especially on housing. We will fight any government on this issue."

By contrast, the BNP's response on the issue has been erratic. It set out plans for a giant caravan park of 1,000 mobile homes sited on public land in Dagenham set aside for permanent housing. When it was pointed out that the £1,000-per-caravan budget would create a Steptoe & Son eyesore without facilities, the idea was dropped in favour of what Mr Griffin has dubbed a "sons and daughters" policy to give the offspring of current tenants first refusal on homes.

Placed alongside incidents including a local BNP vote against sending a message to congratulate the British Olympic team at the Beijing games because it included athletes such as Dame Kelly Holmes and Amir Khan, and the fact that BNP councillors occupy the bottom seven places for attendance, opponents say its record speaks for itself.

Mrs Hodge, targeted by the BNP with leaflets attacking the £50m fortune she inherited from her Jewish father, said: "I have spent three years exposing the true nature of BNP councillors in Barking. I want to turn this threat into an opportunity to destroy their credibility nationally." The announcement last week that the BNP's head of publicity, Mark Collett, had been reported to police for alleged threats to kill, amid talk of a major split in the party's higher echelons, has raised hope among opponents that its challenge could implode. The BNP swatted aside claims that Mr Butler had stepped down, saying he was focused on Barking and Dagenham.

An unorthodox campaign may play a pivotal role in the "Battle for Barking". A nondescript office block on the A13, overlooking a corner of the vast Ford plant that once employed 50,000 but now provides 2,000 jobs, is the HQ of Hope Not Hate – a coalition of activists including the Searchlight anti-fascist group, unions and community groups. It has been building a network among women's groups, churches and others uncomfortable with the BNP.

Its campaign will harness the full paraphernalia of modern electioneering, including an email list of 142,000 voters, telephone canvassing and targeted leafleting. Sam Tarry, the Dagenham-born activist leading the scheme, said: "The days have gone when the BNP could be dismissed as swivel-eyed Nazis. In the last general election, people were cagey about saying they'd vote BNP. That shame is no longer there. Our job is to expose the BNP for what they are so decent people don't vote for them. We will be relentlessly negative about what the BNP are – their record in power, the criminal record of their leader and their damaging policies."

Nearby lies the council ward of Goresbrook, the epicentre of BNP support in Barking and Dagenham. Its streets are lined with terraced houses, many displaying the signs of right-to-buy ownership such as conservatories and extensions. One, with a Union flag and a St George's flag fluttering outside, belongs to Richard Barnbrook, the former art student with a penchant for erotica who is the BNP deputy leader on the council. He says London will be "decimated" by immigration if the party fails to win Barking and Dagenham.

As she walks past, Beryl Ferguson, 64, a retired shopkeeper who has lived on the estate for 42 years, begs to differ. She said: "I voted for that lot [the BNP] last time but not now. I've got Africans a few doors down and you get used to each other. We've got to rub along. The BNP don't want that, do they?"

Back at the market Mr Myatt is less optimistic. "Democracy is a bit of a myth in this place," he says. "We will have democracy for one day and then it is back to an elected dictatorship.

"The problem is that here we're heading for a BNP dictatorship. For the moment, they leave me alone but what if they come to power? They call Islam wicked. I'd love to meet them face to face and put them right. This is my country as much as theirs. What are they going to do? Take away my British passport?"

Barking: Result in 2005

*Labour: Margaret Hodge, 13,826, 47.5 per cent

*Conservative: Keith Prince, 4,943, 17.0 per cent

*British National Party: Richard Barnbrook, 4,916, 16.9 per cent

*Liberal Democrat: Toby Wickenden, 3,411, 11.7 per cent