In the summer of 2005, at their ad hoc London club night Gauche Chic, the party people Niyi and K-tron pulled out a best-of-1990s-rave-hits CD and played it to a crowd of teenagers and twentysomethings. The kids were too young to have felt the full force of Let Me Be Your Fantasy the first time around. But they liked what they heard. Playing old rave tracks alongside demented new disco, ragga, crunk and arch pop music chimed with the nightlife lunacy that was building. Rave felt like a fresh source of inspiration in an emerging club culture.

From its inception at the end of the 1980s, “old rave” (as it is now called) gradually degenerated into a dreary free-party scene, where men of a certain age cavort to increasingly chin-stroking dance music. But the early spirit of rave never died; it was just waiting for its time to come round again. New rave is a second coming: not just a throwback to the lawless euphoria of its golden age, but an aesthetic focus for a new generation of club kids, artists, fashion students and night-time celebrities who just want to dress up and get down.

New rave was publicly christened by the singer of its fluoro-coloured flagship band, Klaxons, who are at the tipping point of crossover success. The scene has thrown up a raft of great, slightly idiotic new pop groups and DJs, including Trash Fashion, Shitdisco, Silverlink, WarBoy and Namalee ’n’ the Namazonz. It has its own pin-up — Jet Storm, the singer from Trash Fashion — and its own couturiers, in Gareth Pugh, fashion’s current golden boy and an architect of out-there clubwear, and the directional designer Carri “Cassette Playa” Mundane, who borrows the cartoon style of Sega, Pac-Man and all manner of gaudy neon ephemera and turns it into joyous club clobber. Her manic designs can be seen in the London retail palaces of Kokon To Zai and Dover Street Market. The movement also has an in-house publication, the fashion zine Super Super, and a Factory-style creative collective, !Wowow!, whose unofficial leader, Matthew Stone, has been described as a walking zeitgeist. “We think about new rave on a daily basis here,” says Steve Slocombe, founder of Super Super. “I can look at a plant pot and think, ‘How new rave is that? And can I wear it?’” To which the answer is? “Yes, clearly.”

Not everyone is so enthusiastic, however. The clubbing magazine Mixmag has dismissed new rave as just being about a few silly kids in east London. But they are missing the point. All radical shifts in nightclub culture are about silly kids somewhere. The Haçienda was about a few silly kids in Manchester, Taboo was about a bunch of silly west London woofters in the early 1980s, and Studio 54 in New York was about Bianca Jagger, Liza Minnelli, Michael Jackson and Andy Warhol mostly being a bit silly. This group of silly creative mates is no different. A new club moment is upon us.

“New rave is about absurdity, comedy and randomness,” Slocombe says. “Everyone commenting on it is getting a bit overconcerned about the rave element and forgetting about the newness. But this is the beginning of a new way of looking at pop culture.” He believes that culture needs a shake-up, and that new rave, with all its potty styling and weird music, might just be the thing to do it. “There is so much rigid conformity to culture. We will look back at the fake smiles of celebrities on magazine covers in 10 years’ time and think, ‘God, they looked weird.’ Music and fashion are pillars of British culture. And they’re up for grabs again.”

It is not difficult to spot the similarities between the end of the 1980s, when old rave emerged, and the current socioeconomic climate. It’s all there: the demonisation of teenagers; the imminent end of a political era; a trenchant fear of global collapse. If the Great British youth knows how to do one thing, it is how to throw a good party at a time of tension and fear. If it is going down, it is going down smiling, in neon, with one unholy racket playing behind it.

In east London, a succession of collapsible parties — All You Can Eat, Anti-Social, Teens of Thailand, Young Turks, Boom Box — have given the scene its magnetic new playgrounds. Some play rave records. Some don’t. But the spirit remains the same. The !Wowow! art gatherings in New Cross have became a thing of legend, and Stone has emerged as the enigmatic, Warhol-ish figurehead for it all, with Mundane his acid Nico. “What I love about these people is that they have followed their dreams,” says Ben Reardon, the editor of i-D magazine. “They have made something happen. They squatted, had no money, sometimes didn’t eat, but all with the purpose of making art, making clothes, making parties — and they have done it all off their own backs.”

“There is something tangible and spontaneous going on here,” says Alex Needham, of NME. “We haven’t had that for a long time. Club culture had got so tied up with the superannuation of everything — superclubs, superstar DJs — it needed to let a new generation take over. It isn’t about neatly packaged nightclub spaces any more. And everyone looks brilliant.”

What is happening in east London has parallels with what happened in the East Village of New York in the 1980s — a youthful convergence of art, club, fashion and music people collecting under an outré (and cheap) umbrella. “It is about a magpie approach to creative theft,” Slocombe says. “A £400 coat is not going to make you look stylish any more. The new-rave ethos is about going to some weird shop in Finsbury Park where they sell 1980s sportswear. Everyone wants to look more Day-Glo and loonified than the next person.”

But can new rave survive the transition into the mainstream? After all, once a scene goes overground, the people who started it often lose interest. “It isn’t about owning it and fencing it off,” Slocombe says. “It’s about steering what is essentially the next wave. It hasn’t reached mass uniformity yet.” Needham agrees: “You’ve yet to get a hit record from Klaxons. But the time feels totally right for it.” Reardon sums it up, saying: “Leigh Bowery and Rachel Auburn were laughed at in the 1980s for trying something new, and now they are heralded as icons of an era. Why not herald the people we have now and their scene while it’s happening? We shouldn’t have to wait for things to be over before we celebrate them.” Grab your glowsticks before it’s too late.

Times recommends

• Ask me about sex, not pay
• Culture clubbing
• Honor Blackman: Words from the wise