Allison Ogden-Newton's father was a GP. He did it for more than 50 years, mostly in the plush commuter belt around Gerrards Cross, Buckinghamshire. Ogden-Newton describes it as "Tory heartland": golf courses, men getting the train to Marylebone, women staying at home with the Volvo.

Ogden-Newton got out. At university, she studied industrial relations; then she worked for unions, in Kentucky in the fiercely anti-union American South – "I've been shot at more than once" – and back in Britain, campaigning against poisonous paint solvents. Next came charity work, the traditional kind, then the more modern, entrepreneurial sort. She now runs Social Enterprise London, a profit-making body that advises and lobbies for socially-conscious businesses.

Ogden-Newton is a confident woman of 47, still "on the side of the righteous" in her view, but comfortable giving orders. She earns £80,000 a year. She and her husband, who runs a property management company, and their three children live in a large, cool house in Richmond in leafiest south-west London. They have an upmarket 4x4 in their front drive, an olive tree in their back garden and original artworks on their walls. The afternoon I arrive, their au pair is looking after the children, who are just home from private school, while Ogden-Newton gets ready to go to a conference in South Korea.

It is a life that feels almost impregnable. But this is an illusion. One of the things Social Enterprise London does is find businesses to fulfil government welfare contracts. "Since the general election," Ogden-Newton says as we sit in the sun in her garden, "90% of the contracts have been cancelled." For a moment an expression of alarm passes across her face. "I'm absolutely spellbound by the speed and the totality of it." But then she recovers: "I think the contracts that have been taken away will be replaced with cleverer arrangements." Was this turbulence what she expected when she took her current job? She smiles. "I always thought it was profoundly insecure."

Being middle class in Britain has changed. Politicians and the media and many Britons still talk about "the middle class" as if it is a steady, secure, cohesive social group. They assume it is growing ever more populous and influential. "We are all middle class now" has been a favourite newspaper headline for decades, as long-term social and economic and political trends have weakened the upper and working classes. "By the 1980s... the middle classes appeared to be the ascendant force... even the victors in the long class war," write Simon Gunn and Rachel Bell in their 2002 history Middle Classes: Their Rise And Sprawl.

Yet in the book's final chapter, which covers the 80s onwards, there is the beginning of a more ambiguous story: the increasingly competitive nature of middle-class life and the decrease in job security; Margaret Thatcher's opening up of the classic middle-class professions, such as university teaching, to market forces; the slow decline of the great state and corporate bureaucracies; the downgrading of middle managers by new business ideologies. These shifts, conclude Gunn and Bell, have left "few if any areas in which middle-class people work untouched".

In some ways, middle-class life has changed for the better, the authors acknowledge: more consumer pleasures, widening opportunities for women, rocketing salaries for some professionals, rewarding new career paths for the self-motivated and nimble, for people such as Ogden-Newton. In the inner London borough where I live, which is increasingly full of middle-class people like me, earning unspectacular salaries by London standards, the Icelandic ash cloud this spring left local schools half-emptied of teachers and pupils. Despite the recent financial crisis and recession, spending the Easter holidays abroad – something only very rich people did in my childhood – was apparently still quite normal. Yet is this modern, free-spending version of the middle-class Good Life sustainable? The sociologist Richard Sennett, quoted by Gunn and Bell, thinks not: "The crisis of the middle class," he warns, "is just beginning."

Stephen Overell, associate director of the Work Foundation, shares some of that pessimism: "There is an ongoing hollowing-out of the middle ranks in the British job market – the managers, the administrators," he says. "What growth there has been [in this area] has been driven by the public sector over the last 10 years. With the government's spending cuts, you have to question the future of many of those managerial jobs." For many middle-class people who hang on to their jobs, he continues, prospects are not much brighter: "In the middle-class workplace, employees' autonomy and discretion have collapsed dramatically compared with 20 years ago. Software is standardising work. There are more procedures and guidelines, more surveillance. People at the top end are doing OK, but the rest feel that their working lives are getting worse." Middle-class employment, you could say, is becoming more like that long endured by the working class.

Of course, being middle class is about more than just your job. But other traditional aspects of middle-class life have acquired their own modern anxieties. The value of saving is being undermined by low interest rates and jumpy stock markets. Property ownership is becoming more difficult for future generations because of high house prices. The chance of a comfortable retirement is threatened by meaner public and private sector pensions. The old middle-class behaviours and values – self-restraint, deferred gratification, a degree of snobbery – have less relevance in a Britain where all classes scoff supermarket ready meals and small-talk about Britain's Got Talent.

"To be middle class today," Gunn says, "is to be in an edgy position. The notion of being middle class does still carry an awful lot of freight. But there are divisions within that middle class, between the public and the private sector, between people already in the professions and people trying to get in. The payback for being middle class in Britain has always been security: networks of people that you know, investments. What we have now is a very fluid middle class. Few people in it expect to do the same thing all their lives. They are constantly striving. I don't know how many of us know that if terrible financial things went wrong in our lives, we'd be OK."

Kim Ormsby and family: 'We don’t talk about money. We just know we haven’t got much.' Photograph: David Yeo for the Guardian

Kim Ormsby is one of the worriers. She is 45, still has young children, and runs the recycling and medical waste disposal for 60 NHS sites across west London. She earns £39,000, about one and a half times the average British full-time wage. Like all but the lowest-paid public sector workers, her pay has recently been frozen by the coalition government for the next two years.

"I'm earning a lot more than I thought I would when I started in the NHS," she says when we meet for a rushed coffee in the canteen of one of the hospitals she covers. "Fourteen years ago, I was on £12,000. I've always had savings. But I'm not saving at the moment. In fact, I'm spending my savings. They really have dwindled."

The life she goes on to describe does not sound exactly spendthrift. She and her husband, who has a lower-paid job in the same department, live with their son and daughter in a semi in Rickmansworth, Hertfordshire. They moved to the dormitory town from London two years ago because the property was cheaper, but their three-bed house needs work. "Sometimes we sit in the lounge and think, 'God, this is depressing.' The wallpaper's peeling – it needs to be stripped." They own one 10-year-old car. "We don't talk about money. We just know we haven't got much."

Ormsby is not bleak about everything – "I really enjoy my job." But to squeeze in the necessary hours, she gets up at 5.15am, and works for an hour in the evening after the children are in bed. The family summer holiday is one week in France.

She knows that not all middle-class Britons live like this. "We have got some rich friends. They tend to go out more. They have nice holidays; skiing, or somewhere hot." Does she envy that? "Yes," Ormsby says with abrupt intensity. "I would like to have a decent holiday." Does she think of herself as part of the same middle class as them? "Is there such a thing as middle class any more? It's as if the middle class has just gone like that" – she moves her hands farther and farther apart across the canteen table – "and the top part should go into the upper class or something."

Thirteen years ago, the management consultants McKinsey produced an influential report called The War For Talent. The report argued that able individuals were the key to corporate success, that due to demographic shifts and globalisation they were in short supply, and that organisations needed therefore to compete for these people and reward them accordingly. Since 1997, this idea has come to permeate the middle-class workplace. "Within professions there are much greater rewards now for outstanding stars," Overell says. And often these "stars" see their peers in international rather than national terms. "If you go to London and New York, say, the people at the top are forming a group. They understand each other. They regard themselves as a tribe." Members of the tribe – business executives, celebrity architects, management consultants – are always travelling, often transatlantic in their accents and assumptions, and tend to see the world as simply a series of problems to be solved.

At the same time, within the British middle class, "there are also some whole professions that are pulling away from everyone else". The most infamous of these is financial services. In my experience, at least, bankers have a slightly contradictory status in middle-class life: mentioned endlessly in conversations with peers about money or property or how the world works, but rarely actually encountered. As Ormsby puts it, fiddling with her polystyrene coffee cup in the hospital canteen, "It's like another world."

'What really grated about my non-City mates was that they talked about what they did with real passion,' says Alex Preston. Photograph: David Yeo for the Guardian

Until three months ago, Alex Preston was in that world. He entered it almost by accident. His mother and grandfather were academics, and at Oxford University he did English and wanted to be a novelist. But then he made friends there "whose fathers were in the City. I went to their houses. And I thought, 'I fancy a bit of that.'" Working in the City, he told himself, would be a short-term thing: "Putting aside a few quid, and then sitting in a farmhouse in the south of France, writing my Ulysses."

Preston is 30, dapper and self-assured. We meet at a cafe at Stansted airport; he is on his way to France for the weekend for his mother's 60th. Earlier this year he published This Bleeding City, a semi-autobiographical novel about London bankers. "I always saw the City as something separate – almost outside the British class system altogether. That American idea of class as being only about money." He stayed in the City for 10 years, working at different times for a bank, an investment company and a hedge fund, and discovered that separateness was indeed one of the City's defining characteristics. "You talk about 'civilians' [non-City people]. Guys would say, 'I don't know if I can go back to a civilian salary.'"

The long working hours made it hard to keep in touch with non-banking friends. But he tried: "There was a time when I was trying to convert them. They were all public sector guys. We played football on a Tuesday night, and I'd say, 'Guys, you could immediately quadruple your salary.' They said, 'We have ideals, and we like the job security.'"

He suddenly looks melancholy: "What really grated about my non-City mates was that they talked about what they did with real passion. In the City, you are basically doing a job that doesn't interest you. The City gets intelligent people to do tiresomely repetitive jobs." Long-term career satisfaction is considered by sociologists a characteristic middle-class expectation; on that score, Preston found the City lacking.

The compensation, of course, was the money – and the opportunities it brought to self-invent: "When I started in the City, tastes were blingy, a bit Essex – 'Look at my big watch.' Then people got into shooting, country estates, wine cellars, wearing a lot of tweed." Preston shakes his head in theatrical disbelief: "I went shooting!" What does he think this change in bankers' spending habits was about? "It's saying to the rest of the middle class, 'We are the bosses.'"

Then there are the more subtle City status symbols: a subsidised second career, or a very early retirement. Preston says he "didn't save much, alas" of what he earned in the City, but he is working on his second novel and doing an English PhD, enviable choices for a 30-year-old in London with two small children. Ogden-Newton says, "If your kids go to private school, you see these fathers who have made enough money in the City and don't need to work any more." An edge comes into her voice: "They have a 'photography business' or something."

In Britain, the middle class has long had elites and internal divisions. Every class does; it is one of the reasons we often talk about them in the plural. But the sheer breadth and vague boundaries of the middle class have often made it seem uniquely fragmented. "How can millionaire financiers, farmers, shopkeepers, possibly be lumped together in any social category?" ask Alan Kidd and David Nicholls in their 1998 book The Making Of The British Middle Class?

In fact, being middle class has always been a slippery business. Having servants, renting a good property, owning a good property, owning a business, being employed in one of "the professions", how you speak, how you use cutlery – at different times, all these have been regarded as essentials of middle-class life. In the 19th century, an identity was created which emphasised ambition, inventiveness, effort – "You work like stink," as Ogden-Newton puts it – and the middle class presented as a confident, outward-looking Britain's driving force. Yet mixed with this triumphalism has always been envy and insecurity: seeing yourself as the middle group in society can leave you feeling either smug or beleaguered.

For most of the 20th century, the decline of the aristocracy and expansion of managerial and office work greatly benefited the middle class. But there were periods, such as the 70s, when surges in working-class militancy – and working-class fashionability – threatened this supremacy. "Middle class" became a pejorative, even on predominantly middle-class university campuses. Accents and life histories were adjusted: in 1975 a British diplomat's son called John Mellor renamed himself Joe Strummer, and soon afterwards began singing for the Clash in football-terrace cockney.

That era of middle-class shame and proletarian chic seems remote now. The election of Thatcher in 1979, with her constant, reverent references to her upbringing as a shopkeeper's daughter, restored the middle class's political potency. Her policies, such as City deregulation and reducing the top rate of income tax, effectively led to the creation of today's many middle-class millionaires.

Today, despite their financial precariousness, the British middle class's tastes in food and interior decor are ever more widely imitated. David Cameron, like almost everyone from aristocratic families these days, strains to present himself as a typical middle-class person, his much-filmed London kitchen full of items from Habitat and John Lewis. In once socially-diverse professions such as journalism, middle-class people are now ubiquitous. The middle-class aptitudes for education and self-improvement and networking – the real constants, perhaps, of middle-class life over the centuries – seem ever more useful in the modern world. "Some people still stay in the middle class even if they don't have the money," says the sociologist Ray Pahl. "People say, 'Poor so-and-so hasn't got any money. Let's invite him to our house in Italy.'"

However, for people to consider each other part of the same social class in the long term, Pahl warns, "Reciprocity is important: the exchange of meals, of hospitality." The polarisation of middle-class salaries and working patterns is making this more difficult. Preston says he has one friend who has been for dinner at his house "maybe 150 times" without a return invitation, although he insists they are still close.

Geography and lifestyle also increasingly divide the modern British middle class. "There are different middle classes in different places," Pahl says. Since the early 60s, middle-class families in London have been moving into the inner city, while in most other British conurbations they have been moving out. As a consequence, the kind of homes and neighbourhoods and schools middle-class Britons use have diverged. The neat, middle-class enclaves of Edinburgh or Leeds, with their almost wholly middle-class streets and playgrounds, offer a different life from scruffier, more socially mixed but increasingly gentrified Hackney or Lambeth.

Overell lists some other middle-class divides: between flexible and full-time workers, double- and single-income families, American-style workaholics and European-style professionals who disappear on holiday for the whole of August. "There was more commonality of experience at work in the old days," he says. "People do find it harder to relate to other people's work now. Jobs are very specialised. There are real divides opening between occupations. Ultimately it results in less social solidarity."

Maybe the middle class has finally become too vast and loose a coalition to hold together. The Office for National Statistics does not use the term, preferring smaller, more technical categories such as "higher managerial", "lower professional" and "higher supervisory". For decades, the supposed disappearance of the working class has been the big class story in Britain; perhaps that stopped people noticing that the middle class was also dissolving. At the least, retired bankers aside, a sense of ease has gone. "Smug self-satisfaction is no longer the middle class mind-set," says Gunn.

In her lovely Richmond back garden, at nearly three o'clock in the afternoon, Ogden-Newton gulps down a supermarket smoked chicken and cheese bagel for her lunch while we talk. Behind her in the kitchen, her laptop is open, waiting for her to blog and tweet on behalf of Social Enterprise London before her taxi to the airport comes. "Maybe that's what defines the middle class these days: the willingness and the ability to box and cox," she says, sitting forward in her garden chair, wearing smart shoes but an old T-shirt, hair hurriedly brushed. "I work 12-hour days. I share the childcare with my husband. I love what I do, and I love my family life, and I love gardening. But I am running out of hours."