Market Square in Royton, in the borough of Oldham, is not really a market, or a square. In this narrow rectangle of dishevelled shops, set back from a busy A-road, number 18 stands out. Just two weeks ago, it was an abandoned fruit and veg shop. Now, festooned in purple and yellow, it is the buzzing nerve centre of Ukip’s most concerted assault yet on traditional Labour territory.

On Friday morning, the party’s deputy leader, Paul Nuttall, was holding court. He described the forthcoming Oldham West and Royton byelection on 3 December as “a referendum on Jeremy Corbyn’s leadership” (although it is only two months old). With him was Paul Oakden, a shaven-headed, one-time floating voter from a family of Labour supporters. It was Oakden who masterminded the anti-EU party’s near-sensational result in the neighbouring seat of Heywood and Middleton last year, when Ukip shrank Labour’s majority of 5,971 to just 617. Oakden has carried over the same team from that contest, along with the same candidate, John Bickley. Oakden describes Corbyn as an “Islington chap” who does not “resonate round here”. Already helping him was an 80-year old retired heavy-goods driver, dressed in jacket and tie, and a 19-year old design supremo who would not look out of place drinking a craft beer in Islington North.

Ostensibly, the odds of a Ukip victory here are long. Michael Meacher held the seat for Labour for 45 years, beating Ukip into second by nearly 15,000 votes in May. Nationally, the party’s mood has deflated after the failure to win more than one seat at the election, despite a 12% share of the vote. But John, a 70-year-old retired office worker who didn’t want to give his surname, offers an insight into why Nigel Farage’s party is pouring in resources. John has always been Labour, but won’t vote for Corbyn. “I remember when we had to go to bed at seven because of the blackouts. There was no electricity. He wants to take us back to that.” Ukip is the only party he would now consider. Removing his thick glasses, he adds: “Enoch Powell had the right idea.”

Once the biggest producer of cotton textiles in the world, Oldham’s fortunes declined steadily in the last century. In May 2001, tensions between whites and the Pakistani and Bangladeshi communities, who make up around 20% of its population, erupted into rioting. At the subsequent general election, BNP leader Nick Griffin stood in Oldham West and Royton and won over 6,000 votes – still the party’s second best-ever showing in a Westminster constituency.

Facebook Twitter Pinterest Ukip leader Nigel Farage meets students in Oldham. Photograph: Dave Thompson/Getty Images

Labour wants to keep the campaign squarely on local and economic issues, particularly tax credits. On Thursday it selected Jim McMahon, a truck-driver’s son who now leads Oldham council, as its candidate. While his campaign will stress his local credentials, many in the town care about the bigger picture. Aisha, who also didn’t want to be identified, runs an eyebrow threading shop. She is undecided, though her daughter and full-time Corbyn fan will probably persuade her to vote Labour. Aisha’s father came to Oldham from Pakistan in the 1950s, when, she says pointedly, “there was a real labour shortage”.

From Oldham Blue Coat school, you can just about make out, across the south Pennines, the cotton mills that once made the town wealthy. In Jason Casey’s A-level class there is a range of emerging political views. Some of the class are already old enough to vote. They are universally hostile towards Ukip. To one or two, the Tories seem the natural rulers. James Tierney is a Conservative supporter because “they can control the economy better” but he does not want to cast a “wasted vote”, so will probably vote Labour. Most are, however, eager to hear more from Corbyn, though Anna Worthington fears that her mother’s job in business would be at risk if he were to become prime minister, and Iwan Phillips, a Labour member who supported Andy Burnham, is conscious that “there are some people who will never, ever vote for Corbyn”. Nuala Scott is unswayed by their concerns: “He’s going to bring in more voters that are disillusioned, because Labour actually stand for something now.”

In what will be Corbyn’s first big electoral test as leader, Labour’s challenge will be to try to maintain the momentum that put him in charge, while for Ukip it will be to play on voters’ fears about immigration, the EU, and the electability of the man from Islington.