Bella! The gorgeous world of Ms Freud

In a business known for big egos and grand gestures, Bella Freud stands out as a designer of quiet brilliance. As she presents her latest collection at London Fashion Week, Deborah Orr meets a woman with a passion for perfection – and the vision to match

Bella Freud is serious about fashion, so serious that when she expresses the nature of her creative compulsion, one feels a jolt of something like shock and awe. She is sitting at her kitchen table, samples from her new collection piled up all around her, and she is talking about clothes in a way I've never heard anyone talk about clothes before. Her long, elegant hands are raised around her long, beautiful face, and she is describing what it was like when she started out on her own.

"I had all these feelings about clothes, and I'd have an idea of how I thought someone could look. To make it and then see them looking like that, it was so... it was really... wonderful. Having an idea that becomes three-dimensional and goes off and lives its own life on somebody else's body, that's really... proper. Because an idea, if it's just stuck in your head, is dead after a while."

In way it's almost funny, that the great-granddaughter of Sigmund, and the daughter of Lucian, should be talking about garments in such terms. Her cerebral description of clothes as an expression of emotions seems entirely Freudian, and her sensuous talk of bodies invites a flash of remembrance of the sight of her own naked flesh, painted by her father in years of sittings, for five or six of his earthy, savagely powerful portraits. "Calm down, love," part of you wants to say, "it's just schmutter." But another part of you thinks instead: "That is absolutely enviable and splendid. You are extraordinary."

Nor does the intensity stop there. Freud's whole way of working appears to have evolved just so that she has a conduit whereby these complicated "feelings about clothes" can be gotten out of her. She seems unconcerned about ambition, or even about profit – although really she is, and has to be, pretty hard-headed about the bottom line. Still, it's easy to become misty-eyed as she talks, and believe in the idea that all that actually matters is that Freud keeps on making these personal, totemic garments that say so very much about her own psyche. She works so that she can work.

Freud talks about clothes as if they have always meant everything to her. She has a memory of being seven and starting a new school. All the other children, she recalls, were in smart new blue uniforms, while Bella had been dressed in a load of old things that were merely an approximate blue to the uniforms the others were wearing. Likewise, when she tries to get across how much she hated the Steiner School she was sent to later, she mutters about wearing beige things made of hemp. In the hints of bohemia the anecdotes contain, there are echoes of Hideous Kinky, the first novel published by her writer sister, Esther, about two little girls out on the hippie trail with their young mother.

If, when Freud upped sticks and moved to London at the age of 16, she was rebelling against the hippie life, she chose the exact cultural moment and milieu for the expression of her disapproval. In the city she got a job as a shop assistant in Seditionaries, the Kings Road boutique run by Malcolm McLaren and Vivienne Westwood, from which the hippie-hating punk movement was created. Even then, though, she was serious about clothes, and left after a couple of years for Rome, where she studied fashion, before returning to London to a grand job for someone still in her early twenties – working as a designer with Westwood. Rich as the experience was, she still couldn't wait to be entirely in command of the feelings about clothes she wanted personally to express without anyone else's feelings about clothes getting in the way.

She left her job with Westwood after a couple of years, and launched her label at London Fashion Week in 1990, where she has maintained a presence in some shape or form for all but a couple of seasons ever since. She very rarely does full-scale collections of her own stuff though, and doesn't particularly hanker after her own shops or even after splashy concessions in department stores. She has a teensy, tiny collection of three gorgeous knitted dresses and a little top going into the shops for this season. Her collection for this London Fashion Week, earmarked for sale in January, is not so very much larger – knitwear and T-shirts, plus a bag and a pair of vertiginous, comfortable, covetable shoes that she made in collaboration with Christian Louboutin.

"I've been doing small collections for quite a few years now. It was a way of condensing everything I think and feel into a small amount of space to express myself. It happened out of necessity because I was doing a big consultancy and there just wasn't the time. But I did it and I thought: 'This is a perfect way for me to work, just doing knitwear and something with a very tight edit.' Within that I can do anything I want, but I can only do a few pieces, so immediately the parameters come right in, even though there's quite a lot of freedom."

The "big consultancy" was Freud's two-and-a-half year stint as the womenswear designer for Jaeger. She was hired in 2000 to reinvigorate the brand, à la Burberry, and felt it was time to leave when the process of finding new, younger customers looked to be well under way. Jaeger, now, is thriving, its new-found position as a happening London label seemingly unassailable.

Likewise, Freud's three seasons with the relaunched Biba produced exquisite collections that were critically and commercially successful. There's no possible question that Freud is, so to speak, cutting her cloth according to its width. Her reputation in the fashion world is unassailable. It's just genuinely important to her that she maintains a highly personal and pure little space in which she is dancing to no one else's tune. Once you understand how intimate the process is for her, then you start to see that that's what makes her clothes so distinctive. They're boyish but feminine, sexy but playful, and very much like herself. Often they'll have words on them, occasionally pictures, even though she'd run a mile from an easy slogan or an easy prettiness. Usually I'd cringe at the idea of clothes being "witty". But somehow, her stuff really is full of wit.

Freud still, she says, likes doing full-scale collections, "but I prefer doing them for someone else. In the fashion world the tendency is to do so much, and the more you do the more you want to do because it's very stimulating and seductive. But I do want to do other things in my life."

Some of those things remain closely linked to fashion. Freud is highly social and enjoys collaborating with other people. For a few years she presented her collections at London Fashion Week, not on the catwalk but in films she made with John Malkovich, who wrote and directed avant-garde movies that featured Freud's clothes. More recently she was attracted by a spread of photographs she saw in a magazine that had been taken by a young photographer from Belarus called Elle Muliarchyk. The 22-year-old had been turning up at boutiques with bags full of props, going into the fitting rooms, trying on clothes, styling herself and photographing the results. Freud got in touch with her and invited her to come up with some way of featuring Freud's clothes in some similar act of guerrilla photography. The results will be exhibited next month.

Freud's other collaborations are much more surprising, though, and one of the most notable is her partnership with the Palestinian academic Karma Nabulsi, with whom Freud runs a charity called The Hoping Foundation, which raises money to support Palestinian refugee children. Freud's organisational abilities – not to mention her knack for generating tons of dosh – are fulsomely displayed in her fund-raising work. An auction of celebrity karaoke slots at Ronnie Scott's jazz club this year raised an astounding £500,000, while previous fund-raisers included concerts by Primal Scream and Massive Attack, and also generated a photograph much beloved of the press, that of Kate Moss sharing a kiss with Jemima Khan. More mundanely, as well, she seeks part-time and flexible work for the usual girlie reason that she likes spending time with her husband, the writer James Fox, and with their six-year-old son, Jimmy.

Yet however clearly it can be seen that Freud's unusual way of working has been alighted upon out of choice rather than necessity, it still feels like a mode of survival, the direct product of working on the London fashion scene, rather than out of Paris or Milan or New York. Whatever London's claims to be the emerging capital of the Western world, there is little sign that London's reputation as the poor fashion relation is as healthily on the wane as it might be. Maybe that's good for Freud, because it has allowed her to resist the blandishments that a more dynamic industry would have thrust inexorably on her. But it still feels, when this powerful talent is working on such a small scale, that there's a Britishness to her modus operandi that is limiting, rather than expansive.

London Fashion Week itself is very much about making virtue out of weakness. It concentrates on showcasing new young designers, even though a small number of more established designers still choose to show here, too. Fortuitous as this is for Young Turks, it's really just a symptom of the long-standing malaise in the British fashion industry, rather than anything more deliberate. "In Milan and Paris all the professionals are so good and they are so well backed up that there's not much room for young designers to show," says Freud, who at 46 is still doing clothes than feel carefree and youthful. "In London, the fact that the industry is in such poor condition is good for them, because there are all these gaps and holes and everyone's looking for a space when they can shine. And they do, except that quite often, two seasons later nobody gives a shit and they're looking for someone else."

Freud herself has made a niche in these gaps and holes that suits her. Nevertheless, she marvels at the support available now that was not around when she started out. "There are all these things that there didn't used to be, like special rates for people showing for the first time. They get a special rate for models, they get often sponsorship from the British Fashion Council... It's got a million times better, but there's still a long way to go.

"You're always told there's no industry and blah blah blah but you know the figures for fashion in Britain. There's a huge market, people are willing to spend, but you don't see it being tapped in the way that it should be. Instead you see those high-street companies using the situation for their own gain. I suppose it would be very altruistic if they didn't. But there's something missing and I suppose it is the industry really, the manufacturers. There's very little of any class or elegance. All the really gorgeous stuff is made on a very small scale."

She gets pretty cross as she talks about the paucity of craftsmanship in Britain, which came as a shock to her after her time in Rome, where she found the opposite tendency in some ways to be irritating. "It's incredibly romantic in Rome, but nobody does anything – I mean literally no one does a thing. Rome is all about snobbishness and all the old princes, and "does your button-hole undo?", because if it doesn't that's nouveau-riche and if it does you're the right kind of person. So it's all about that. But the positive side is that there is respect for the people who make that stuff. I used to hang out with this shoe-maker who had worked for Ferragamo and visit old tailors. I was always really interested in how things were finished, and what was inside – all that subtlety which is very fashionable now."

It was a shock to her when she started trying to source artisanal skills in Britain, after her experience in Italy. "The thing that I lament about Britain is, when I was starting out I'd go to mills up North, and there was very little that could compete on innovation with Italy, or even wanted to. It was so basic and they weren't prepared to change. When I did my first knitwear collection I tried to work with this factory in Scotland and in the end they just told me to fuck off.

"Basically, they did so many thousand crew-necks a week and that was what they wanted to do. I was asking for something very different. They did one collection and then they just said they didn't want to continue because it was too much hassle. Eventually the British manufacturers did start changing, but it took 10 or 15 years for those old-school factories to be ready to invest some of their money or profits or time. And it is expensive, it is laborious and it is trying, but that's why it works in Italy. They're always up for pushing the bar, they're always doing development."

The few who were willing to experiment back in the 1980s and early 1990s have tended to find their forward-thinking has been rewarded. John Smedley, the Derbyshire mill that's been going since the 18th century, worked with Vivienne Westwood at a time when creative mills were hard to find, and now has a formidable international reputation as a manufacturer of the very finest cotton, wool and cashmere. Freud is generous in her praise of the company's actions in the 1980s. "It was such a big deal in those days. To stop those machines and do a sample, that would take a day, and they could make I don't know how many thousand garments in a day, so it required a certain amount of belief. All the people who were amenable and alive to that, and who could afford to do that, were courageous."

Freud believes that there is now a great deal more enthusiasm for innovative high-quality work among the companies that have survived thus far, and a much greater desire to become designer-led. This can be seen most clearly in the revived fortunes not just of Jaeger and Burberry, but of Pringle, or Brora or Daks – which now has Giles Deacon working for it. The modernised approach is beginning to work itself right through the industry at last. "I don't know what's happening with the big companies, but with the small ones there's much more flexibility and creativity," says Freud. "Big houses are going to them and asking them to make special things, and the ones that have managed to keep going now seem more able to deliver the quality that is demanded of them." How sustainable these positive new developments will prove to be in a quickly globalising economy is questionable though, as Freud's own working practices attest.

"I haven't had anything done here for years," she says ruefully. "I get it all made up in China. I couldn't afford to do it if I got it done here. I know the people that I work with, the agents, and they seem like the most honourable people in the world. I behave as honourably as I can at my end. I've discussed working conditions with them, asked them if they can assure me that the rights of the people commissioned to do the work are respected, and they say, 'How can you imagine anything else?'

"I work in small quantities and ask for specialised items, and pay extra because of that. I never haggle, and let them know that I'm prepared to pay extra and I hope that that does make some difference. The very fact that the quantities are small makes it more likely that the work is being done in little operations that treat their workers better. But the truth is that I don't know because I haven't been there."

This revelation is surprising, because some of the clothing that is being designed by Freud, then made up so far away by people she has never met, is exquisitely elaborate and complex. It seems really sad that these garments, created in the head of this woman with her "feelings about clothes", are put together by humans who are quite, quite unknown to her, and are unlikely ever even to see them being worn, in a picture in a magazine. I guess it's called cutting your cloth according to its width, but it feels – for the industry in Britain as a whole – like an ending and a loss, rather than a beginning and a triumph.