“The trouble with cinema in our country, unlike some of the rest of Europe, is that most people want to eat popcorn and be entertained,” says Shane Meadows, the self-taught film director from Uttoxeter who took the Rome Film Festival by storm last week with This is England, a stunning evocation of 1980s Britain.

“They don’t want to be challenged by a film about working-class racism. They don’t want to be dragged through the bushes.” His face breaks into an amiable grin. “But people can see what they like. It’s their money.”

This is England, to be shown at The Times BFI London Film Festival on Tuesday, was given a standing ovation and a special award at its European premiere in Rome. The film tells the story of 12-year-old Shaun (Thomas Turgoose) in a bleak coastal town, who turns to local skinhead leaders as substitutes for his father, killed in the Falklands War.

Devastated by the loss, and picked on by schoolmates, he at first falls in with a gang led by the intelligent and sensitive Woody (Joe Gilgun), experiencing the first stirrings of teenage love with a punk girl nicknamed Smell (“rhymes with Michelle,” as she artlessly explains after their first kiss).

The gang let him join in their “hunting games” (which include vandalising empty houses in bizarre costumes, a scene at once hilarious and disturbing), shave his head and dress him up in skinhead gear. His hard-pressed mother Cynthia (Jo Hartley) is at first appalled, but senses that the gang is relatively benign.

“All of us know that moment when your friends become your world and your mum and dad are an embarrassment,” Meadows observes. Things turn ugly, however, when Combo, a rival skinhead leader — a mesmerising performance by Stephen Graham — returns from a prison spell and takes over the gang, enrolling “his” skinheads in a nascent National Front branch and leading them in attacks on Asian immigrants.

Only when the charismatic but unstable Combo beats to a pulp Milky, the one West Indian member of the gang (Andrew Shim), does Shaun see the light, casting his cherished St George’s flag into the sea. It is a remarkable performance by Turgoose — “Tommo” to the cast — an unknown (now 14) spotted in a Grimsby games arcade. “He was the only one who asked for a fiver and we said, ‘that’s our boy’,” Meadows says.

Critics in Rome applauded its “brutal honesty”, which is about right: this is surely one of the most powerful films about racist violence, and for that matter about the raw emotions and realities of life on a rundown council estate, yet made by a British director. It is completely believable, and at times very funny, as well as extremely grim.

On the face of it the film — shot in Nottingham and Grimsby on a budget of £2.2 million, with a score by the Italian composer Ludovico Einaudi — is about the 1980s, and specifically 1983. Thatcher’s Britain appears almost as remote as Victoria’s: this is the England of the Falklands War, the miners’ strike, Rubik’s cube and Roland Rat. And, of course, skinheads.

Meadows, now 33, was himself a skinhead and school dropout — he still somewhat resembles the kind of shaven-headed “big tough guy” he admits admiring when he was growing up. The character is based on Meadows himself, who vividly recalls the way in which gangs filled a vacuum for youngsters with little hope.

“In the town where I was brought up you were guaranteed status through physicality, through violence. In a lot of communities in England growing up is about how tough you are. When I was a kid, seeing a group of skinheads for the first time was like seeing the Army marching down my street. For the first time in my life I felt protected.”

The film distinguishes between the original reggae-loving skinhead gangs and the politically extreme groups that followed them — a “ready-made army, easy prey”. The first-generation skinheads, Meadows says, were white and black kids who sought work in factories and shipyards and were united in a love of Jamaican music.

“The message was not so much anti-immigrant as anti-Thatcher. It was incredibly arrogant, of course. We were basically saying, ‘Maggie Thatcher, you run the country how you like, but we’re going to run our town the way we like’. It wasn’t true, but it felt true at the time.”

Editor's choice

• U2 at Nou Camp Stadium, Barcelona
• The 50 Best Movie Villains
• The 15 golden rules of theatre etiquette