On top of a cupboard in the Blenheim Forge workshop is a wooden box with two compartments, one marked 'fucked', the other 'not fucked'. The 'fucked' half is scattered with half-finished knife blades deemed not good enough to make it to completion – some are bent, others are misshapen and a couple don't appear to have anything wrong with them at all. The 'not fucked' blades are the lucky ones, destined to be turned into high-performance artisan kitchen knives that look more likely to have emerged from the studio of a Japanese maker than under a dingy railway arch in Peckham.

Roll back the clock a couple of years and there would have been no need to separate the successes from the failures – in the early days, at least, there weren't very many of the former. Hand-making a knife from scratch is a lengthy, complicated and brutal process that involves heating metal almost to melting point, hammering, pressing and grinding it, then doing it again and again. The scope for things to go wrong is, understandably, pretty large – and in the early days it usually did.

In the beginning

"I wish I could say we were really into our cooking, weren't happy with all the knives on the market and decided to make something better," admits Jon Warshawsky, the brand's friendly, wild-haired co-founder, "but it's less exciting than that; we were just messing around." Most people's messing around, admittedly, doesn't involve complicated, labour- and resource-intensive industrial processes, but Warshawsky and James Ross-Harris – two thirds of the current Blenheim Forge team – clearly aren't most people.

The pair made their first knife in 2012, using home-made equipment in the garden of the house they still share in south London. Having already knocked up a meat-smoker and a hot tub in the time between their studies and part-time jobs, they decided to make a chef's knife with a pattern-welded steel blade.

It took us two years to make another knife as good as the one we'd just made for fun

Pattern-welded steel, often called Damascus, is made by fusing layers of different steels together to create a blade with optimum cutting performance and a rippled effect, and it's often used by Japanese bladesmiths – revered as among the best in the world – to create incredibly sharp and beautiful knives.

Making pattern-welded steel was, Warshawsky admits, a bit of a longshot. "It's something Japanese bladesmiths have done for centuries, but they've never written a book explaining exactly what to do," he says. "If you want to learn it, you either have to go to Japan or buy a lot of steel and try it out yourself – we did the latter."

Remarkably, given their DIY garden setup and complete lack of experience, they got it right first time. "It went so well we thought we'd make a set," Warshawsky strains to tell me over the screech of the industrial grinder, "but the next time we tried it, it didn't work."

It didn't work the time after that, either, and for two months they kept trying and failing, no matter what they did, until they started to have the occasional success in between the failures.

"There was a time when I thought there was some element of the process that everyone was keeping a secret, because it just seemed impossible to get right," says Warshawsky. But the frequent disasters – and odd triumphs – is what drove them to keep trying. They watched knife-making videos on YouTube, swatted up on metallurgy in books and trawled through online forums, but most of all they kept doing it again and again. Warshawsky likens it to learning an instrument: "You could watch videos of someone playing a violin endlessly, but until you get one in your hands it just won't cut it."

Before long, things were going sufficiently well that knife-making had ceased to be a hobby and become altogether more serious. They moved from their garden to a workshop and built their own forge, and started repeating parts of the process over and over, noting down their achievements and failures and refining the process. Each of them – now joined by a third member, Richard Warner – focused on perfecting a different step. Warshawsky's responsibility was for the forge, Ross-Harris had grinding and sharpening, while Warner created the handles and made many of the machines used by the team.

After a year and a half of trying, things started to go right more often – in another six months, they were producing high-performing, beautifully finished knives that were far too good to just be consigned to a draw in their own kitchen. "The first knife is still somewhere in the house," Warshawsky says. "Occasionally we take it out and say 'this is actually pretty good'. Our current knives are much better, of course, but it took us two years to make a knife as good as the original one we'd just made for fun."

Keeping it Peckham

Standing on the platform at Peckham Rye station, you can just about see the workshop's ramshackle, red gate, with its abstract, wrought iron forms and corrugated plastic roof. Behind the gate, you can see the forge they built themselves – smaller and less industrial than you might imagine, like an oversized birdhouse that glows in the half-light and pumps heat out into the freezing London day.

There's also a puddle of water on the floor, under the Japanese-style whetstone grinder that Warner built from an old motor, some wood, part of a beer barrel and a huge, circular whetstone they bought on eBay for 99p. "It's a bit cowboy how I've done it," says Warner, "but it works."

The forge looks like an oversize birdhouse that glows and pumps heat out into the freezing cold

It's a remarkable thing, which whirrs round at high speed, grinding down the unfinished surface of the blade while water – hence the puddle – sprays over it to keep the metal from heating up. Standing next to it is a deafening, soaking experience, and one whoever's tasked with the grinding that day will have to put up with for up to an hour at a time.

The grinder also represents a kind of watershed for Blenheim Forge – the first step in a series of improvements implemented by Warner designed to make the whole process more efficient. Before it arrived they worked on a belt-sander, which did the job but was painfully slow and not really suited to such a specialist task. Now relegated to sharpening duties, the belt-sander's replacement – a custom-made sander (called a linisher) that looks like a giant micro scooter in the half-finished state I see it in – is currently being made, while a bigger forge is also in the pipeline. The dream is to power the new forge with waste oil, probably recycled chip fat.

Warner admits there's a fine balance to be struck between making the processes better and more efficient and retaining an artisan product. "We want to streamline production if the demand comes along, and if you can make knives faster, you can sell them for less" he explains. "They're still as good and they're still made here – the knives won't lose their story. It's about finding that happy medium between producing enough knives for people who want them and keeping it... – he searches for the right word – "Peckham."

Friends like these

As you enter the workshop itself, it's surprisingly organised considering the noise and the smoke pumped out by the forge outside. It's also become home to some friends of the team: at one end there's an etching studio, next to that a microbrewery, and in against the wall in the middle there's a huge 1950s Swedish bread oven that a local baker hopes to use – once they've figured out how to stop it sucking up all the power in the building and shorting everything, that is.

Opposite the oven is a stack of hardwood ready to be made into handles, most of it brought to Blenheim Forge from people's gardens or nearby Nunhead cemetery, and on the day I visit, Warner is sawing up a branch from a bay tree brought in by one of their customers, filling the workshop with a pungent, unmistakable aroma.

Most of the hardwood used to make the handles comes from customers' gardens or the nearby cemetery

Being able to collaborate with neighbours, customers, local chefs and those bound up in Peckham's vibrant and growing food scene has been central to the Blenheim Forge story, says Ross-Harris. "We've had a huge amount of interest from people in the area," he explains. "It's been massively beneficial for us to be based where we are – we've been working with Peckham Refreshment Rooms down the road, for example, and it's just amazing how many interesting people there are around here, all passionate about food."

The plan, of course, is to take Blenheim Forge's knives well beyond the borders of SE15 – starting with the rest of London and then, who knows? If things continue to head in the right direction, there'll be more knives for more people, each still made by soot- and grime-stained hands under a railway arch in South London.

It's an obsession that got out of hand, and has become a labour of love as much as a homegrown South London success story. Though as Warshawsky drily puts it: "This isn't going to make us filthy rich. Just filthy." ■

For more information, or to arrange a visit to the workshop, visit blenheimforge.co.uk