In the back room of a sparsely decorated pub in Bolton a man with a shaved head and a tattoo poking out above his shirt collar hands out what look like wraps of cocaine to his friends. It is just after 11am but behind him the pub is already packed with young, mainly white, men. Suddenly it erupts.

"We want our country back. We want our country back … Muslim bombers off our streets." The chants ring out as tables are thumped and plastic pint glasses are thrust into the air.

"It is going to be a good 'un today," says the shaven-headed man, leaning across the table towards me to make himself heard. "We're going to get to twat some Pakis – I can feel it."

The pub, a few hundred yards from Bolton railway station, is the latest gathering point for the most significant rightwing street movement the UK has seen since the heyday of the National Front in the 1970s.

For the past four months the Guardian has joined English Defence League demonstrations, witnessing its growing popularity, from protests attracting just a few hundred hardcore activists at the end of last year to rallies and marches which are bringing thousands of people on to the street – and into direct conflict with the police and local Muslim communities.

The EDL plans to step up its campaign in coming weeks, culminating in marches through some of the UK's most high-profile Muslim communities, raising the spectre of widespread unrest.

With the British National party beset by infighting and recriminations after its poor showing in last month's local and national elections, the UK is facing the prospect of rightwing activists turning away from the ballot box and back to the street for the first time in three decades.

The English Defence League sprang up in Luton last year in reaction to a demonstration by a small extreme Islamist group during a homecoming parade by the Royal Anglian Regiment.

Since then this chaotic organisation – based largely around existing football groups and hooligan networks – has mobilised thousands of people against what it terms "Islamic extremism".

In telephone conversations and face-to-face meetings, members of the EDL's secretive leadership team repeatedly told the Guardian that the group is not racist and just wants to "peacefully protest against militant Islam".

But at each demonstration I attended while making an undercover film for the Guardian's investigative film unit, Guardian Films, I was confronted by casual – often brutal – racism, a widespread hatred of Muslims and often the threat of violence.

It was only possible to film some of the most alarming scenes with a hidden camera. Inside a pub in Stoke in January about 3,000 EDL supporters gathered for the first demonstration of the year. They had spent the past four hours drinking. The balcony around the top of the cavernous pub was draped in flags bearing the names of different football clubs – Wolves, Newcastle, Aston Villa – and the chants "We all hate Muslims" and "Muslim bombers off our streets" filled the air. The atmosphere was tense, and not just because of the growing anti-Islamic rhetoric. The pub was packed with rival football gangs from across the Midlands and the north of England. Twice, fighting broke out as old rivalries failed to be subdued by the new enemy – Islam. "They're just kids," said one man. "That is not what we are here for today."

As we moved outside for the EDL protest – during which supporters became involved in violent clashes with the police – a woman asked me for a donation to support the "heroes coming back injured from Afghanistan". I put a pound in the bucket. "Thanks love," she said. "They go over there and fight for this country and then come back to be faced with these Pakis everywhere." She paused, before adding: "But to be honest it is the niggers I can't stand."

This kind of casual racism is not hard to find on EDL demonstrations. The Guardian has also identified a number of known rightwing extremists who are taking an interest the movement – from convicted football hooligans to members of violent rightwing splinter groups. The EDL says it is doing what it can to keep them away but acknowledged their influence.

"At previous events, we have had far-right groups like Combat 18 turning up," the EDL's self-proclaimed leader, who uses the pseudonym Tommy Robinson, said in a local newspaper interview. "It's naive to guarantee no violence."

Nick Lowles, of the anti-fascist group Searchlight, says these groups have a growing – and dangerous – influence.

"What we are seeing is more organised fringe elements – the National Front, old networks of Combat 18 people and members of the BNP – who are getting involved specifically to try and use the EDL to spark serious disorder," says Lowles. "This is a serious development; we just need one of these demonstrations to go wrong – for there to be a serious incident – and it won't just lead to disorder in Dudley, Bolton or wherever, it will spread to towns and cities across the country."

Strange coalition

But the EDL is not a simple rerun of previous far-right street groups. On each demonstration there is a smattering of non–white faces and one of the group's leaders is Guramit Singh, a British-born Sikh. The organisation's core support appears to be young white men who are often fuelled by drink and sometimes drugs. But its Islamophobic message seems to have acted as a lightning rod for a strange coalition – from rightwing Christians who see it as being on the frontline in the "global fight against Islam" to gay rights activists.

At the front of the EDL demonstration in Bolton in March, among the banners decrying Islam, was a man holding up a pink triangle. He looked nervous when I asked him what he was doing there. "This is the symbol gay people were made to wear under Hitler," he said. "Islam poses the same threat and we are here to express our opposition to that." It turns out he is a member of the EDL's lesbian, gay, bisexual and transgender division, which has 115 members.

Many of the people I met said they had never been involved in rightwing politics before. "I finished my night shift at 5am and we got on a coach down from Wigan about six," says Steve as the Victoria line tube train rattles along towards Pimlico and the EDL's London demonstration a few weeks later. "Reckon I should be back in time for it to start again at 10."

The carriage is packed with around 50 EDL supporters who set off from the north-west that morning. They launch into one of the EDL's favourite songs: "There were 10 Muslim bombers in the air." Steve explains over the din how his factory is being "overrun by immigrants". Like others on EDL demonstrations, he exudes a sense of excitement that "something is happening". "We have had enough, no one is taking us seriously … about anything – but they are going to have to listen now."

But the EDL is not only attracting disaffected working-class men. On a chilly evening in early March, Alan Lake settles into his seat in a cafe in central London. This smartly dressed man in his mid-40s has emerged as a key figure in the organisation and is quickly into his stride – warning that the UK will have Sharia law in the next 40 years "unless something is done".

A London-based IT consultant, Lake has spoken at several EDL rallies and sees himself as one of the organisation's thinkers. "The middle-class intellectuals are coming forward and also American speakers – some of them quite famous, although I can't give you names yet … they love the fact that we can have people that can go on the streets."

Addressing a far-right anti-Islam conference in Sweden last year, Lake told delegates it was necessary to build a united "anti-Jihad movement" and spoke of the need for "people that are ready to go out in the street", boasting that he and his friends had begun to build alliances with "more physical groups like football fans". Lake says he is opposed to violence or confrontation but regularly returns to the importance of the EDL's physical presence.

"The EDL has a lot of support and is growing quickly and crucially what it has done is deliver an activist movement on the streets," he tells me subsequently. Pressed on the levels of violence at the demonstrations, he replies: "These people are not middle-class female teachers … if they continue to be suppressed it will turn nasty in one way or another … We have put bodies on the street, writing letters to the Times does not work … if we are going to have a mess that is so much grist to the mill."

Lake says he is exploring a political future for the EDL – and argues it should consider throwing its weight behind the UK Independence party. He later introduces me to Magnus Nielsen – a Ukip candidate in the general election – who has agreed to speak at forthcoming EDL rallies. Nielsen describes Muhammad as a "criminal psychopath", "the first cult leader" and "psychiatrically deranged". Lake says there is "some synergy" between the two groups.

A few weeks later Lake tells me that he is no longer an EDL spokesman. "I am really working on the Ukip thing so we can offer people an alternative," he says.

A spokesman for Ukip said it would not form any alliance with the EDL or any other "extremist" group.

However, these efforts appear to be part of tentative steps by the EDL to expand its reach beyond its street demonstrations. In March a delegation of activists travelled to Berlin to take part in an anti-Islam rally in support of far-right anti-immigrant Dutch politician Geert Wilders. It is also forging tentative links with the US anti-Islam group Stop the Islamification of America, whose New York demonstration was advertised on the EDL website in April.

Growing unrest

The upshot appears to be a movement that, although chaotic and beset by infighting, seems to be growing in scope and sometimes violence. At a protest in Dudley last month, demonstrators threw missiles at the police before ripping down barriers and rampaging through the town in an attempt to confront anti-racist protesters and local Asian youths. In Aylesbury a few weeks later they again clashed with police.

And despite the group's protestations to the contrary, the prospect of serious unrest is growing. The list of towns the EDL plans to hit this summer is lengthening – Newcastletomorrow, Cardiff, Dudley and Bradford over the next few weeks. According to Lowles the stakes are high. "What we are seeing now is the most serious, most dangerous political phenomenon that we have had in Britain for a number of years," he says. "With EDL protests that are growing week in, week out there is a chance for major disorder and a political shift to the right."

But the appeal of the EDL is not just down to the extreme opinions expressed by people such as Lake and Nielsen. In Stoke a group of teenagers who were on their first EDL demonstration said they had come after reading reports that "the Muslims" were planning to march through Wootton Bassett with 500 coffins. The proposed march was called by Anjem Choudary and his small extremist group Islam4UK. The group is reviled by the majority of Muslims and the demonstration did not go ahead. But this was lost on the outraged teenagers who turned up in Stoke and subsequently travelled to two of the next three EDL events.

Outside the Morpeth Arms on the banks of the Thames in March supporters gathered for the EDL's London demonstration. One who had travelled down from Blackburn was eager to know who had seen a television documentary that he thought showed how a Muslim group were taking over politics in east London. The EDL had carried a link to the film on the front of its website and most of the supporters drinking in the sunshine knew about it.

For Matthew Goodwin, an academic who specialises in far-right politics at Manchester University, this is a crucial difference between the EDL and previous far-right street movements.

"The reason why the EDL's adoption of Islamophobia is particularly significant is that unlike the 1970s, when the National Front was embracing antisemitism, there are now sections of the media and the British establishment that are relatively sympathetic towards Islamophobia," says Goodwin. "It is not difficult to look through the media and find quite hostile views towards Islam and Muslims. That is fundamentally different to the 1970s, when very few newspapers or politicians were endorsing the NF's antisemitic message."

"The point for your average voter is that if they see the EDL marching through their streets shouting about how the neighbourhood is about to be swamped by Muslims or how the UK is going to be Islamified by 2040, they are also receiving these cues from other sections of British society … the message of the EDL may well be legitimised if that continues."

The people on the sharp end of the EDL's message echo this view. Mujibul Islam, chair of the youth committee of the Muslim Council of Britain, says the foundations for the growth of the EDL have been laid not just by extremists but by countless political speeches and newspaper articles. "It simply would not be acceptable to say the things that are being said on these demonstrations about any other group – black people, Jewish people. But we are now in a position where it seems almost acceptable to say these things about Muslims."

He said the growth of the EDL was having a real impact on the way ordinary Muslims were being treated. "A woman I know got on to a tube train which had a lot of EDL supporters on recently and was really badly abused; another man was attacked as he made his way home on the train. These are the consequences of what we are seeing now. It is not just a theoretical debate about freedom of speech."