Hank Dogs, The Ivy House, London

Ten years they've done this, and few are any the wiser. Even when Nick Drake's legendary producer Joe Boyd declared Hank Dogs the first British act he'd loved in 30 years, and helped to record their 1998 debut, Bareback – an eerie album of dryly funny emotional bloodletting that forged a new direction for folk – it caused few ripples here. In the States, things went well, but their record label's sale and other, undisclosed delays have stopped their second album, Half Smile, appearing in Britain until tonight, where it's sold in the back room of this Peckham pub.

This is the place where, 10 years ago, Hank Dogs started the Easycome Acoustic Club; as usual, a half-dozen wildly varying talents strum and sing before their arrival. But when they do appear, you sense that they carry inside them a story far more intense than the bare bones I've mentioned. Andy Allen, who played with the Sex Pistols after Sid Vicious died, stands on the left, with almost dreaded straggly locks and a stetson. In the centre stands his ex-lover, Joanna "Piano" Pace, a tall, rangy blonde with eyes that shoot through you. Lily Ramona, Allen's daughter (her mother was a Slit, completing perfect punk genes), is their rosy-skinned, relatively innocent drummer.

Word had it that tonight might be their swansong, in front of a packed room of the faithful, now that Piano has moved to Wales. But when they play, this strange half-family seem so entwined, you can't imagine them truly separating short of death. Like the songs on Half Smile, this performance is built on the thwarted, unextinguished love of Allen and Piano. In between singing almost everything herself, in a strong, smoky voice, she snipes at him constantly, witheringly rolling her eyes or stepping up to him and staring at the side of his head, as if what's inside has left her speechless. He soaks it up, as though still hoping she'll come round one day, while Lily looks on and quietly laughs at her elders. Every night is like this, sparks flying from the ex-lovers' armed emotional truce.

As for the songs, Half Smile's rueful excavation of their relationship is visited only twice, and it's "18 Dogs", from Bareback, that shows the strength this trio gain from one another as they face the world. Piano sings at her proudest, imagining herself in an isolated cabin, facing down a pack of strangers, whom her dogs wait to tear limb from limb. All three Hanks sing with eyes closed and form a straight line across the stage by the show's end, linked loners in harmony. Buried British treasure, they deserve to be discovered.