It was the perfect tabloid headline: bold and funny, short and shocking. “swan bake”, yelled the front page of British daily The Sun. “Asylum seekers steal the Queen’s birds for barbecues.” Callous Eastern Europeans, the paper breathlessly reported, were capturing swans (all of which, bizarrely, belong to the Queen), killing them and, because they were foreign and heartless, eating them. You couldn’t make it up. Except, of course, they did. An urban myth, peddled by cranky internet forums and fringe right-wingers, had found its way onto the front page of the nation’s best-selling newspaper.

The UK is at its best when it is international: when it opens its doors to outsiders, be they tourists, students or migrants; and when it exports its finest products, ideas and talent to the rest of the world. This was the Britain the world saw six months ago during the Olympic and Paralympic Games, from the ambition and beauty of the opening ceremony to the warm welcome given to visitors.

Britons tend to believe they are known for their tolerance, generosity and sense of fair play. They welcome outsiders and have a proud record of providing homes and a haven for those fleeing conflict elsewhere. But over the past two decades that reputation has been gradually eroded. Attitudes towards migrants have hardened. Suspicion has grown. Politicians feel there are no votes to be won in appearing “soft” on immigration.

There are, however, votes to be won in building a strong economy – and thriving economies tend to have liberal immigration systems. There is a popular view, call it the “coming here to take our jobs” argument, that too many migrants entering a country at too quick a rate has a negative effect on the local economy. Not so, says Michael Clemens, an economist at the Center for Global Development. “People who arrive add value to the economy and they are consumers,” he says. “This is why you get what, to that crowd, seem impossibly wild results.”

He cites a study by the Princeton economist David Card into the effects of the Mariel Boatlift, a sudden influx of 125,000 Cubans to Miami in just six months in 1980. Fidel Castro had agreed to let any Cubans leave who wanted to and US president Jimmy Carter happily let them in. Miami’s population rose by 7 per cent yet, Card found, there was no impact on employment or wages of people already living in Miami. “It’s very counter-intuitive,” accepts Clemens.

“Immigrants, almost by definition, are going to be ambitious and hard-working,” says Richard Lambert, a former editor of the Financial Times and ex-head of the Confederation of British Industry. If you’ve left your home, your family, your entire life, to cross an ocean for the slightest chance of improving your lot then you are not going to turn down jobs, even if they mean 3am starts and the minimum wage. That same drive is often lacking in Britons. “Why is it [if] you go into any sandwich shop, any hotel, you won’t find a Brit working there?” asks Lambert.

Britain, following in the footsteps of Canada and Australia, has introduced a points system for migrants, enabling the government to work out exactly which high-skilled foreigners it wants to come to the country. But the focus on skills is not necessarily helpful, argues Clemens. “Low-skilled workers,” he says, “are absolutely essential to the most modern economies. Somebody needs to be cleaning floors, building the buildings, doing childcare, picking fruits and vegetables, which others simply won’t do.”

Opening the doors and letting anyone in may sound attractive to economists, but there are social consequences to consider. Nine years ago the European Union grew from 15 member states to 25. Suddenly millions of citizens from Eastern Europe would have the right to freedom of movement within the EU. Most of the original 15 members placed a variety of restrictions on the entry of workers from their newest partners. Britain, uniquely among the major European economies, did not.

“I was one of those who thought it was a good idea to throw our doors open on day one,” says Lambert. “I felt proud that we did and Germany didn’t but maybe it wasn’t such a good thing, the sheer numbers were such that…” he tails off. “It’s all very well for a middle-class person like me to say how wonderful it is, it brings in all sorts of talent, but if you’re on the housing waiting list in Sheffield and you suddenly find yourself bumped down, you can understand the resentment.”

Sheffield could do with more people though – its population has been falling for decades. Migration, then, has to be managed. Extra central government money for teachers, doctors and housing needs to follow each migrant. With the right support a big population increase can be a boom for a depressed city.

There is one more issue: how Britain is viewed by the rest of the world. Here’s another newspaper headline: “Scrambling Britain’s golden egg”. It’s from The Hindu last September, after hundreds of students at London Metropolitan University were threatened with deportation over alleged visa irregularities. In an attempt to crack down on the number of people supposedly using student visas to enter the UK, the government revoked the university’s licence to sponsor students from outside the EU.

“It was unfortunate,” admits Jo Beall, director of education at the British Council. Unfortunate and damaging. Indian newspapers ran with the scandal for weeks and admissions tutors trying to encourage international students to the UK say it has had a major effect on recruitment. If fewer international students come to the UK, it will be to the detriment of the country for decades to come. Lambert recalls meeting a team of senior officials at Korea’s Blue House, all of whom had studied at British universities. “Soft power can be a cliché, but it’s real,” he says.

There was no golden era in which Britons watched outsiders coming into their country, moving into their streets, and opened their arms wide, beamed a smile and bellowed, “Welcome! Come on in!” But there is a middle ground. Perhaps it’s time to build a replica Statue of Liberty on the white cliffs of Dover. Or at the very least, carve there the most important words from Lazarus’s poem: “Give me your tired, your poor, your huddled masses yearning to breathe free.”

Britain can seem cold and uninviting, suspicious of outsiders. To be all it can be, it must harness the spirit of the Olympics and embrace its best designers, artists, technicians and engineers. It needs to decide what sort of country it wants to be. Letting a few more people become British would be a start.

It is often said that the UK has an island mentality. Brits tend to refer to the rest of Europe as “the Continent”, make little effort to learn other languages and have more jokes about foreigners than would be considered healthy. But Britain is at its best when it embraces the rest of the world. Here are seven ways for Britain to become a better country.

If you’ve got a postgrad degree, come on in
And if foreign students want to stay once they’ve finish their degrees they should have that option.

Start teaching French to children at age five
And offer Arabic and Mandarin as an option at all secondary schools.

Not everything needs to be in London
Help Britain’s great cities retain talent with tax incentives for businesses that move to Liverpool, Birmingham and Newcastle.

Encourage your best and brightest to leave
Send 100 headteachers to Kenya, ship off nurses to Guatemala and a team of lawyers to Bangalore. Long-term, Britain will benefit.

Don’t ignore the power of the ‘Made in Britain’ label
Too many British firms shy away from a prominent Union flag on a product or business card.

Build more housing
Britain has a severe housing shortage which needs to be addressed, particularly if it is to attract more people. Also, focus on quality.

Build better houses
Build better buildings, full stop. Britain is not lacking great architects; what’s missing is political vision.

The UK still does some things right. From art to architecture, sport to science, there are companies, organisations and individuals across the country who are making an impact throughout the world. Monocle meets four of them flying the flag.

The urbanists shaping the world

With images of planned cities such as Masdar and Songdo being brandished by urbanists the world over as examples of what not to do, masterplanning is under fire. And no wonder: it’s all too easy to be seduced by soulless but hi-tech cgi presentations when looking to build the cities of the future.

But London-based John Thompson & Partners has a more human approach to city planning. As well as the UK, the firm has projects in Turkey, Russia, Germany, Abu Dhabi, Iceland and China.

London is a city whose history has had an indelible impact on its present form, and it’s this idea, that the map of a city should tell a story, that sets JTP apart.

The company uses fictional histories to model the organisation of neighbourhoods and towns. “We call it narrative planning,” says Thompson.

With founding mythologies and made-up histories of trade routes, the structure of their cities is akin to that of European capitals. Thompson cites “history, culture and urbanity” as things lost in places such as Songdo.

With successful projects across London, that city serves as their portfolio. “Everyone seems to pass through,” says jtp partner Joanna Allen. “It’s so much better to show clients what kinds of work you’ve done.”

JTP makes use of another of the city’s assets: London can provide an international team, and senior staff such as partner Ying Ying Tian have been instrumental in securing jtp’s newest commissions in China.

Proving that the Olympics shouldn’t last just 17 days

The legacy of the London Olympics can be measured in many ways: the increased number of children taking up sport; the improvement in Britain’s image around the world; the subtle yet noticeable change in national psyche that, yes, we can do some things right. Legacy is all those things but it’s also this: the most innovative, well resourced and thought-through urban planning project London has ever witnessed. And it’s also this: the first Olympic city to try to stitch its venues back into the fabric of the city.

The challenge, says Eleanor Fawcett, head of design at the London Legacy Development Corporation, as she looks out over the park is “how we take this festival landscape of the Olympics and turn it into a new bit of east London”. It needs to “feel like a nice place rather than like a film set”.

It will take 20 years, says Fawcett, to turn this corner of east London into a neighbourhood, complete with three new schools and several hundred homes. But if this ambitious project succeeds it will be as influential as the 17-day sporting festival that captured the world’s attention last summer.

The galleries making Britain an art star

Launched by Brit Hannah Barry and German Sven Mündner in 2008, Hannah Barry Gallery, occupying a warehouse in Peckham’s emerging Copeland Cultural Quarter, is at the forefront of southeast London’s art gentrification. Within a year the art history graduates caused a stir at Venice Biennale with their Peckham Pavillion, presenting work by young local artists. Today, the gallery’s portfolio includes sculptor James Capper, photographer Christopher Page and painter Rob Sherwood.

“Good art can come from anywhere as long as there is a message to be told,” says 30-year-old Barry.

A mission to harness academic intellect to the needs of business

Dr Andrew McGordon, a senior research fellow at the University of Warwick, knows countless ways to destroy a battery. Standing in his Battery Abuse Facility – a concrete room with reinforced doors, a special exhaust system and a skein of wires – he subjects them to extreme temperatures, punctures them with nails using a hydraulic ram and leaves them charging for much longer than they should.

“We’re trying to simulate what happens in real life,” he says. “We’re interested in finding the mistakes before the customer does.” Amid the facility’s inevitable explosions and plumes of smoke, McGordon and his team are helping the world’s biggest car companies understand how the next generation of electric batteries reacts to real-world conditions.

McGordon is one of 600 staff members at the Warwick Manufacturing Group (WMG) – an academic department at the University of Warwick, and one of the world’s leading research centres for value-added innovation. Some of the world’s best universities are found in Britain, not just educating students but playing a vital role in the wider economy. Set up in 1980, wmg now conducts around £140m (€173m) of research annually, and has helped blue chip firms including Jaguar Land Rover, Nissan and Toyota solve manufacturing problems and develop new technologies. “We’re a unique bridge between academia and industry,” says Jane Coleman, the Director of Administration at the Group. “Most of our research has an end-user or customer. We don’t have many academics sitting in their offices doing research for its own sake.”

Keen to make use of Warwick’s state-of-the-art facilities and technical expertise, Tata Motors – India’s largest automobile company – set up the Tata Motors European Technical Centre (TMETC) in a WMG building in 2005. Last year, the university announced the creation of the National Automotive Innovation Campus funded by the British government, Jaguar Land Rover and TMETC.

WMG gives small and medium-sized enterprises a boost, too. Since 2008 its International Digital Laboratory, a £50m (€62m) facility that unites research in mathematics, psychology and computer science, has assisted more than 400 firms and created 13 start-ups, many based on its own intellectual property. Those businesses support more than 100 jobs, and safeguard 150 more. “One-person companies may operate in a shed or a front room,” says Coleman. “Our technologies and experts can help them grow.”