LAU, Queen’s Hall, Edinburgh

While we’re busy falling over ourselves in the rush to laud the latest beard-and-guitar export from Wisconsin tundra or Williamsburg tenement, it’s easier than ever to undervalue home-grown talent. Lau formed in 2006, a coming together of three British traditional musicians with outstanding individual pedigrees but little in the way of mystique.

Featuring Orcadian Kris Drever on clear-blue vocals and beautifully fluid acoustic guitar, Oban-born Aidan O’Rourke on the fiddle, and token Englishman Martin Green, who proved there’s very little you can’t do on the accordion, Lau have won Best Band at the BBC Folk Awards two years running and it isn’t difficult to see why.

Their second studio album, Arc Light, released earlier this year, is a ceaselessly innovative reimagining of the possibilities of British folk music, and last night’s gripping two-hour performance transformed its explosive peaks and gentle ruminations into something even more dazzling.

Despite their impressive individual attributes, together Lau are substantially more than the sum of their parts. Although they performed sitting down, there was a theatrical intensity to the interaction between the trio which made for compelling viewing. Green played the accordion like a rag-puppet rodeo clown, bucking and jack-knifing back and forth in his chair; O’Rourke twisted from side to side as through trying to screw a hole into the stage, while in the centre Drever bobbed up and down like a buoy in the bay, his feet tapping out a steady, thudding metronome. They were joined from time to time by pedal steel player Stuart Nesbitt and backing vocalists Bella Hardy, Corinna Hewat and Inge Thomson, whose atmospheric sirens’ call elevated “The Burrian”, in particular, to epic status. And, as Green pointed out, they also made “the stage 60 per cent uglier” each time they departed.

But mostly it was just three men covering vast amounts of ground. They veered off into jazzy extemporisation on “The Burrian”, which resembled Pentangle at their most ambitious, and displayed an instinctive tongue-and-groove telepathy on “Sea”. They proved equally comfortable negotiating the more straightforward lines of “Winter Moon”, a triumph of crafted songwriting, while “Horizontigo” – a tale of “reverse vertigo” on the Fens – made explicit the extent to which folk has been energised by the post-rave generation. As the hypnotic waves of rhythm ebbed and flowed, it sounded like Orbital’s “Belfast” rearranged for the village green.

The banter came mainly from Green, a man who looked like he’d prepped for the show by being dragged through a hedge, rubbed in goose fat then rolled around a barber shop floor, but played throughout like an impish magician. His patter was as blithe and bawdy as the music was deeply felt. Drever told us that he came across the words to Les Rice’s 1950 anti-capitalist standard “Banks of Marble” in the New Economist, a sure sign of the times. Spotting an open goal in RBS’s back yard, the singer dedicated the song to Fred Goodwin. That the response was more of a tsk of disapproval than a tsunami of scorn betrayed the cultural diversity of the modern-day folk audience. Where once this show might have been predominated by politically engaged hard-liners, last night the crowd ranged from bearded hipsters to three generations of the same family, from suited city types to gaggles of girls in their Saturday-night finery tangoing in the balcony.

They ended with “Temple of Fiddes”, a skeletal Strathspey that sounded like mist creeping in from the sea, the stage bathed in a haunting blood-red light. Like most of the two hours that preceded it, it was both sad and uplifting and entirely unforgettable. One of the most exciting and versatile live acts working in any genre, Lau are there to be cherished.

Further dates by Lau are listed on their website.