A homemade union flag and cards with words such as “democracy” and “multifaith” adorn the window of the children’s nursery that stands on what – 16 years ago – was a key flashpoint in some of Britain’s worst race riots.

It was here in May 2001 that a firebomb came crashing through a window of the Live and Let Live pub as Oldham became one of a number of northern English towns to be rocked by a wave of violence that raised questions about segregation, integration and the relations between white Britons and their Asian neighbours.

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Last week, in the aftermath of the London Bridge and Manchester terror atrocities, Theresa May declared: “We need to live our lives not in a series of separated, segregated communities but as one truly United Kingdom.”

In places like Oldham, acting on such sentiments represents a daunting challenge. Residents speak of their shock at recent events and express a cautious optimism that much has changed. But there is also a sense that efforts to improve community relations in Britain’s most divided towns remain a work in progress – along with some worries about the future impact of cuts.

“You can never be complacent. It’s something you have to work at all the time,” said Alun Francis, principal of Oldham College, which lost one of its tutors in the Manchester bombing.

Francis, whose college has long been at the forefront of efforts to improve community cohesion, stressed the common desire by families of all backgrounds to make the most of new opportunities. There is also local pride in initiatives including major strategic investment by the council.

But Ted Cantle, the author of the Home Office-commissioned report into community cohesion following the 2001 riots, told the Observer that Oldham remained one of Britain’s most segregated towns. Official attempts to foster integration across the region where some of the rioting took place had been “lukewarm at best and probably non-existent at worst”.

Cantle, whose report expressed concerns over communities living entirely separate or “parallel lives”, added: “Those areas are still there – white communities on one side and Muslim on the other – and with all the pressure over the years on Muslim communities there has been a sense that they have gone further in on themselves.”

Hours after the Manchester attack, that distrust was evident in Oldham when a mosque was targeted by arsonists. A report last year for Oldham council on its selection by the Home Office as one of 50 places to be offered funding for counter-terrorism work stated: “Oldham’s demographic profile is changing and on occasion there is evidence of community tensions and intolerance within and between communities.”

The centre of the violence in 2001 was a chip shop on Roundthorn Road in the mainly Asian area of Glodwick, where a row among youths descended into racial clashes, followed by three nights of confrontations between police and Asian youths. The chip shop is now a Chinese takeaway. In the surrounding streets, where the red-brick terraces were originally built for Lancashire mill workers, levels of deprivation are among the highest in the UK. But so too are signs that this is a community now more at ease with multiculturalism.

On Thursday, as two white girls cheerfully picked out goods from an Asian sweetshop, an older white man who gave his name as Brian said that the good relations he enjoyed with his Pakistani neighbours were typical: “If you asked me their name I think that I’d be hard-pressed, but we say hello to each other in the street and smile.” He added: “Could rioting happen again? Probably not, but you never know.”

Fazal Rahim, who remembers navigating the area’s debris-strewn streets as a taxi driver back in 2001, insists that the town has since put many lessons into practice, including the dialogue fostered by initiatives such as the Oldham Interfaith Forum, which he coordinates from a local presbytery.

Those lessons have, he says, contributed to the success of the government’s controversial Prevent anti-extremism strategy in Oldham, although he thinks it should be rethought. Many Muslims, he says, “won’t touch it with a bargepole”, viewing the strategy as discriminatory. “The reason it has worked in Oldham is because of the trust we have built across the board – whether it’s the local authority, social services, or the police. This is based on the experience of 2001. But even here, people who have come in contact with it in Oldham – parents, for example – say it has not been a good experience.”

Regeneration can and does work, he insists, adding that class was potentially as important a dividing line in the town today. For others, however, worries about the future revolve around issues such as the impact of austerity.

“We have a difficulty, not just in Oldham but more generally, in terms of the opposition to immigration and what Brexit revealed of a latent antipathy. We have not really addressed how competition for resources has intensified – whether it’s schooling, housing or public services,” said Cantle. There was anxiety in Oldham that the academies programme had “fragmented” attempts towards integrating secondary schools.

The challenge of making the best use of resources is recognised by Oldham council’s chief executive, Carolyn Wilkins, who said: “I think the danger is dealing with it in silos.” She stressed the importance of ensuring that policies were “joined up”.

On that note, others point to the value of amenities such as Alexandra Park, an award-winning Victorian space acting as a physical border between the Asian community in Glodwick and the largely white one in Fitton Hill. “You wouldn’t have taken your family there 20 years ago, but it’s a fantastic community meeting place – and feeding the ducks is a cross-national thing, whether it’s with chapatis or pieces of bread loaf,” said Howard Sykes, a Liberal Democrat councillor and former leader of Oldham council.

“But if people did not feel confident enough and didn’t want to integrate, then it misses the point. Things need to have an Oldham focus – don’t they?”