It's bonkers, but the best gigs are the ones where I forget that it's me

This was the year he was going to dial it down a little having spent the last 15 years making album after album after album (five official releases since 2003, somewhere around 40 – yes, 40 – homemade albums since he adopted his King Creosote alter ego in the late 1990s; more than the Rolling Stones have managed in 50 years) culminating with last year's Diamond Mine made in collaboration with Jon Hopkins, which got him a Mercury nomination and a concomitant boost in record sales. This was the year, then, when he was going to take a step back.

Fat chance. Friday morning, Glasgow, and he's just driven from Fife to take part in a video shoot for his best mate Johnny Lynch (aka Pictish Trail). Last week he was playing the islands – Mull, Iona, Lismore, Edale, Bute – with Hopkins. Tomorrow he's going to start rehearsals with his eight-piece band. He hasn't even told them they're playing a gig for the Scottish Refugee Council's Refugee Week yet.

"I'm not on Twitter. I'm not online," he explains, and he's been too busy to phone. He's also got a day in the DCA (Dundee Contemporary Arts) later in the week in which he has to talk about "something". He's not sure what that "something" might be yet. He's smeary with tiredness, desperate for a cup of tea and yet dutifully sits down to talk.

The last time we spoke was three years ago when he was still smarting after his major label experience with 679 (a Warner offshoot). I'd imagined one Mercury prize nomination later that he'd be in a more upbeat mood this time. But it appears he's a worrier.

That and the fact that as major domo of cottage industry record label Fence Records, located in Fife's East Neuk, (as well as being signed to superindie Domino Records), he feels he's seeing the death of the record industry at first hand. "I'm somebody who sweats buckets when I get a Domino statement because my records up 'til Diamond Mine have not paid back the cost of recording. They just haven't. And even with this one ... I don't know what people think happens with a Mercury nomination. It's sold something like 36,000 copies which 10 years ago would have been absolutely laughable on the back of a Mercury nomination. A number one album is now something like 12,000 sales. Even to go into the top 10 is about 8000 or 9000.

"There's two ways of looking at that. You've got a fair chance of getting into the chart. But it doesn't mean anything because that 12,000 sales pays for very little."

Things aren't levelling off, he says. Sales are still nosediving. "People are just not buying music in any format. It's just too available. With Fence Records I've got a real close picture as to what is happening. I hope we're able to ride it through doing live events. That's the only way. But we need to keep putting out records to keep current, relevant and that's a massive expense. It's almost like records are a loss leader for live events."

This pessimism is possibly the natural outcome of more than 20 years of hard graft making a living from making music. In his twenties Anderson, now 44, formed the Skoubie Dubh Orchestra. When that failed he retreated to his parents' home, battled against depression and started his own ceilidh band. He then began to write and record his own songs in his bedroom before finding others in Fife's East Neuk who loved music as much as he did. The result was the Fence Collective, a crew of lo-fi musicians making music for themselves and anyone else who wanted to buy into their nu-folky, salt-sprayed sound. He's been on a slow rise ever since.

Maybe the rise could have been faster if he was prepared to move away from home. But that was never on the cards. He loves the East Neuk. He feels privileged to live there. But that's just made him all the more aware of the area's problems. The beauty of the place for one thing, a beauty that has led to second-home syndrome. "That's pushed house prices way beyond lots of people's means. I've got friends in their thirties that are stuck at home with their mum and dads. If you hang back in Fife you're stuck there. The prices go up and up and up. Supermarket prices for cheap booze means all the pubs are empty. They're shutting at a rate of knots." He pauses. "I'm starting to rant here," he says and then carries on. He points to the local groceries that rely on local custom and then all the second homers arrive for the weekend with their shopping from Morrison's, second homers who would be the first to moan if the local shop wasn't there.

He talks about how, every time he drives past the giant Amazon warehouse near Dunfermline he starts wondering how many shops has that put paid to. There is much more of this. But he isn't unaware of the effect. After a long monologue that takes in the demise of the music press, the death of record stores and the impact of the Beeching cuts on the railway system back in the 1960s he stops and asks plaintively, "Is this an age thing?"

Growing up in St Andrews Anderson was, he says himself, "a silly wee boy". He had the town mapped out in his head. Where to climb, where to tunnel, all the shortcuts. That was how he was until he discovered girls, cars and music. Early Simple Minds mostly. Until they got bad. He remembers when Alive And Kicking came out and it felt like a "knife in the stomach".

"I was genuinely saddened by that and I still find myself making excuses for that album." No-one was more thrilled than he when the Minds played their early material last year and it sounded so fresh.

As well as nascent Weegie electronica, his musical education came from his dad Billy. The Andersons are a musical family. Anderson's brother Ian records under the moniker Pip Dylan while brother Gordon played with the Beta Band and the Aliens. Billy was an accordion player and taught Anderson the instrument, even going as far as throwing him on to the stage to play in an attempt to combat his painful shyness.

"That was the terrors," he recalls. "I still get the terrors but now it's things like getting on a bus where everyone is sitting and looking at you. Some days I struggle with basic things. I can't take something back to a shop and complain. It's mortifying if I'm with someone in a restaurant and they say 'this isn't right'. I just shrink into myself and think 'just eat it and let's get out'."

It seems strange then that he can get up in front of ever larger audiences and perform. But that's because it's the natural things he gets uptight about and whatever else it is, going on a stage is not natural. "The best gigs for me are the ones where I forget that it's me. I know that sounds total bonkers. But you do forget. You get caught up. You become the song." He smiles when he says it. "That sounds totally hippy, but you do."

He thinks he's finally beginning to grow up. He has a teenage daughter Beth who is as tall as him now and maybe he doesn't do as many "daft things" as he used to. "That goes right back to when I used to jump off the pier. Somebody said 'do you know how deep that is?'" He did, kind of, but jumped in any way. "I only came a cropper a couple of times. I did take the top of my nose off diving off the slipway at Crail. That was a bad one."

What age was he when he did that? "I was living in Crail so I would have been 31." Ah. Not so young then. But he's learning. Sort of. "If somebody throws a skateboard out I'll still jump on it. But I know that it's not going to end well."

In other ways he's older than his years. He's anti gadgets, he worries about what his daughter's generation will inherit. He really yearns for an old car to restore. So yes, then, I think it's safe to say some of this is an age thing.

Where does that leave him? Moving in the right direction perhaps."Me and a mate did buy a really old fishing boat – it's a Fifey, the smallest class – for six hundred quid. We've had to take the deck off. So I'm kind of learning man skills at last. I feel quite good about that. I'm going to be a man soon. That's my future. I'm going to be a man."

King Creosote headlines the Refugee Week Opening Concert next Monday (June 18) at the Old Fruitmarket in Glasgow. His current EP I Learned From The Gaels is out now. For more information on Scottish Refugee Week visit www.refugeeweek.org.uk.

Kenny anderson, aka KING CREOSOTE

Musician