How Islington is giving the West End a run for its money

Alice Jones ventures beyond theatreland to experience the vibrant fringe where 'The King's Speech' first cleared its throat

To the untrained eye, Upper Street in Islington is just another of London's Nappy Valleys, a thoroughfare crammed with buggies, Brora and designer bakeries. But look past the chichi boutiques and restaurants and wander a little beyond the quiet, leafy terraces and gastropub gardens and you'll find a rather different Islington. Hidden in tiny theatres, studios, pubs and back rooms is an arts fringe that is shaping culture – and winning awards – from London to LA.

The King's Speech, which won four Oscars, seven Baftas and has so far taken $337m (£208m) worldwide, began life in the dingy 54-seater studio upstairs at the Pleasance Theatre, off the Caledonian Road, in 2007. Squashed on to the buttock-numbing benches for the read-through of David Seidler's original play was Meredith Hooper, mother of the (now Oscar-winning) director, Tom Hooper, who rang her son after the performance and told him she had found his next film script. Seidler, who also won an Oscar for his script, now plans to return to where it all began and premiere his next play at the tiny theatre.

A brisk walk down the road is the King's Head, home of OperaUpClose, a company founded less than two years ago, which on Sunday night swiped the Olivier award for best new opera production from under the noses of a trio of giants – the Royal Opera House, the London Coliseum and the Young Vic – with their 21st-century Soho take on La Bohème.

And, around the corner from the pub, is the Almeida, which announced this week that Stephen Poliakoff will direct the world premiere of My City, his first new play in 12 years, at the theatre in September. It will be followed in November by the European premiere of Neil LaBute's Reasons to be Pretty, fresh from Broadway and the sixth play the American playwright has staged at the 325-seat theatre, his "English home", since 2000.

They are just three of the institutions making N1 the most agenda-setting arts postcode since the capital's painters and sculptors flocked to the warehouses of Shoreditch in the early Noughties. Bookended by the Almeida at the top end of Upper Street and Sadler's Wells towards Exmouth Market, the streets between are home to more than 10 theatres and many more pub studios and back rooms where everyone from Harold Pinter to Russell Brand have debuted new work.

The theatre director Katie Mitchell started her career at the Old Red Lion and last year another star was born under the low ceilings of the 60-seat pub theatre when Max (son of Jeremy) Irons made his stage debut in Tom Stoppard's Artist Descending a Staircase. Next month, Irons stars opposite Amanda Seyfried in the new Hollywood blockbuster, Red Riding Hood, from the Twilight director Catherine Hardwicke.

And down in an Angel back-alley, the box-office busting trend for puppetry on stage, as seen in War Horse and Avenue Q, has its roots in a ruined temperance hall. There, 50 years ago last week, Lyndie and John Wright (the parents of Atonement director Joe Wright) set up the Little Angel Theatre as the "home of British puppetry".

It's not just theatre, either. On Highbury Corner the Hen and Chickens theatre pub has staged early sets from Russell Brand, the Mighty Boosh and Harry Hill in its top-floor studio and is still the place to catch comedians on their way to the arenas. Only last year Jimmy Carr showed up with 100 new jokes to roadtest on the discerning crowd, whom he later rewarded with Krispy Kreme doughnuts.

Further down towards Exmouth Market, the Wilmington Arms is setting itself up as pretender to its crown. At the monthly night run by the sketch troupe Ladygarden, it's not unusual to see stars from Peep Show's Isy Suttie to Lenny Henry performing to a 40-strong crowd, spot Jennifer Saunders at the bar or bump into Ash Atalla, the producer of The Office, scouting for new talent.

The stained-glass splendour of Union Chapel, too, has become a favourite with comedians – Daniel Kitson, Stephen Merchant and Adam Buxton – as well as stadium-fillers such as Elton John, Bono and the Killers, looking for intimacy. For all of these creative types, Islington offers a space to experiment away from the bright lights and ruinous rents of the West End. Last year, the veteran theatre and opera director Jonathan Miller denounced the West End's "intoxication" with celebrities, declaring that he hadn't been to the theatre in 10 years.

But he did go and see OperaUpClose's La Bohème, says the company's artistic director Adam Spreadbury-Maher, 29. "And before I could open my mouth to say 'Hello', he said to me, 'I have to direct here'."

More than that, the Islington fringe, with its small-is-beautiful creed, shoestring budgets and cheap ticket prices could also act as a model for the arts institutions around the country waiting to see where Arts Council cuts will fall at the end of March.

Spreadbury-Maher, who also runs the Cock Theatre tavern in nearby Kilburn, opened London's Little Opera House at the King's Head in May 2010. With tickets priced between £10 and £22.50 (about a tenth of what you might pay in the stalls at Covent Garden), punters can enjoy their Puccini and still have change for a pint in the bar. after the performance. "We don't receive any funding at all," says Spreadbury-Maher. "The only money we make comes from the box office."

The theatre's hand-to-mouth existence is no hindrance to creativity They have six shows in rep, including a Bangkok-set Madam Butterfly with Pinkerton as an American Airlines pilot. Next month the renowned playwright Mark Ravenhill will make his opera debut in the 107-seat theatre, directing his updated, jazz-inflected version of Monteverdi's The Coronation of Poppea.

"We're the only opera company in the world that is open seven nights a week, 365 days a year. We now produce more new opera a year than the Royal Opera House and English National Opera combined," says Spreadbury-Maher. "The fringe is the most exciting place to be and the most important place to find new work in London."

The King's Head has long been at the heart of the fringe. The capital's first pub theatre was set up in 1970 by Dan Crawford in the back room of the Victorian saloon, using curtains and lamps filched from the Theatre Royal Haymarket and the Lyric Theatre.

Over the years it has staged new plays by Steven Berkoff and Andrew Davies and seen early performances from Victoria Wood, Joanna Lumley and Prunella Scales, among others.

Ten years later, Pierre Audi set up his avant-garde theatre in a former music hall and Salvation Army citadel, around the corner on Almeida Street and the Islington theatre scene took off. Michael Attenborough, the artistic director of the Almeida for the past 10 years, believes that it is the area's social mix – where bankers' mews houses rub shoulders with deprived estates – which makes Islington an intriguing place for artists.

"It's an extraordinarily polarised borough. So you have some fairly well-heeled middle-class families in the smarter squares and then our neighbours are Tower Hamlets and Haringey," he says.

"We do have a stalwart audience that knows and trusts us. But a lot of shows can attract up to 40 per cent of first-time visitors. It really is an extraordinary mix of a local and an international theatre."

So while the area's more affluent residents may help to keep its many institutions afloat, Islington has become an arts destination in its own right, now rivalling the West End for venues per capita.

If further proof were needed of its burgeoning start-up arts scene, look no further than the two Red Lions. Last year, Damien Devine, landlord of the Old Red Lion, closed his other pub, the ailing Sportsman on City Road.

In October, he reopened it as the New Red Lion, complete with a studio and a programme of theatre and comedy: Richard Herring has already headlined.

"It's a subversion of expectations in tough economic times, to close a pub and reopen it as an arts venue", says Will Young, its spokesman.

"But it actually seems to make more money as a theatre pub than it does as just a pub. There's a critical mass of theatres in Islington now. You can make a success of it."