In 2009 a group of young Icelandic football coaches travelled to England to study for their Uefa coaching licences. The trip involved a stop at Reading, where the Icelanders were excited to see at first hand the progress of Gylfi Sigurdsson, Iceland’s own 18‑year‑old creative midfield jewel.

Sigurdsson had moved to Reading’s academy three years before from the successful youth system at Breidablik, a kind of fun, flatpack Nordic La Masia just outside Reykjavik. It was in England that Sigurdsson would really bloom, becoming in the process a frontiersman for the great Icelandic experiment, that frankly quite bonkers investment in youth football enacted around the turn of the millennium by this spiky lump of mid-Atlantic basalt, and expressed most fully in the minor miracle of Euro 2016 qualification. A triumph powered, above all, by Gylfi’s goals and craft.

A heady moment then for Iceland’s bright young things in Berkshire. Albeit, a puzzling one too.

“When we got there Steve Coppell was trying to turn him into a centre-half,” says Dadi Rafnsson, now director of coaching at Breidablik’s academy. “We watched training and he was playing next to André Bikey. It was quite funny. Coppell was saying Gylfi wasn’t quick enough to be a midfielder. But he said: ‘Don’t worry, we’ll find him a position.’ So they played him as a centre-half.”

Happily for the modern history of Icelandic football, Brendan Rodgers arrived soon afterwards, took one look and moved him 30 yards up the pitch. “Thank God for us,” Rafnsson says. From there Sigurdsson would leave for Hoffenheim on a club record fee, and later score five goals as Iceland finished second in qualifying Group A. Although, you never know. He might have made a decent centre-half, too.

It is an appealing story in various ways. The idea that only in England could Gylfi, now with Swansea, be mistaken for Bikey feeds nicely into our own anxieties about wasted talent and stodgy development. More widely, Icelandic exceptionalism has been a fashionable topic for some time.

Here they come, the Icelanders. Offspring of elves and hyper-intelligent Nordic field mice. So neat. So carbon neutral. So politely amused. Happiness indices, social justice, sustainable power: Iceland always seem to be per capita kings, a place where nothing is wasted, only reproduced.

And now they’ve got football, too. Ranked 133 in the world four years ago, the national team have risen 100 places under Lars Lagerback, progress given a compelling narrative shape by the money and care poured into the grassroots during the pre-bust years when the country had more cash than it knew how to spend. This summer Iceland will travel to France as the smallest nation ever to reach a major tournament, not bad going for a lump of volcanic rock halfway to the Arctic with a population the size of the London borough of Lewisham.

There is still an essential weirdness to this collective overachievement. Football has burrowed into the peat here and taken hold. Everyone plays. Everyone watches. Iceland’s indoor football halls are a wondrous spectacle, synthetic bubbles plonked down in the tundra-ish suburbs. But this is a brittle kind of place, too, all shifting plates and sudden spurts of activity. Nobody really seems particularly disturbed, or surprised, by the idea all this progress might not last. “We were very interested in banking, too,” is one slightly caustic observation.

And yet here they are all the same. It is an Icelandic trait to take some small task and essentially do it to death. Some say this mentality comes from the fishing traditions, a kind of survival machismo, the need to sit through every millimetre of briny discomfort until the catch is full. “When an Icelandic person is destined to do something they generally follow through,” Rafnsson says. “Some people would call it a disease. Sometimes you don’t even know when to stop.”

There seems to be a kind of hive‑mind tendency here too. On a separate but vaguely parallel track Justin Bieber is coming to play a concert in one of the football halls this summer. One tenth of Iceland’s population will go to watch him. A tribute to extreme Nordic Bieberism, no doubt, but above all an indication of those dutiful collective habits.

Such has been Iceland’s relationship with football in the last 15 years. It is an institutional obsession, seeded from the top down through the government, the FA and schools and individuals. For now the wheels are still turning, the production lines thrumming. At Euro 2016 the national team will play Portugal, Hungary and Austria. For all the shared self-deprecating glee, nobody really knows what to expect.

Most grand, saga-like structural plans don’t work out. This one has. But how? And how far can it keep on running?

High angle view of a soccer match in progress in a stadium, Laugardalsvollur, Reykjavik, Iceland

BE2FKJ High angle view of a soccer match in progress in a stadium, Laugardalsvollur, Reykjavik, Iceland Photograph: Alamy Stock Photo

Lagerback is adored in Iceland

Iceland’s national stadium is called the Laugardalsvollur. A low-rise bowl nestled in the western fronds of the Reykjavik coastline, it turns out you can walk in through the open front door, look around, shout hello, go down some steps and find yourself out on the pitch.

Try that at Wembley. You wouldn’t get past the second bank of snipers.

The grass is still a dense mossy screed at this time of year, brutalised by the winter wind and snow. A tractor sits abandoned at one end of the athletics track. Despite some recent renovation, the stadium has a 1950s Soviet feel, shades of Dynamo Kyiv’s much-fetishised former home, with its excitingly futurist concrete lines. Otherwise, like a lot of other things in Iceland the Laugardalsvollur looks like it has just sort of been left here by some passing giant, plonked down in a convenient crater between the mountains and the sea.

The Icelandic FA has its offices upstairs along a corridor where someone has framed and hung on the wall the entire Iceland World Cup squad Panini sticker collection (Lars Lagerback is a shiny). A friendly, bearded FA official offers an impromptu tour of the sparse dressing rooms in the bowels of the stadium.

Part of the real success here is they have very educated coaches starting at five or six years of age

They say that when Cristiano Ronaldo came here with Portugal he tried to commandeer a whole room to himself. Given this would have cut the capacity in half and forced his team-mates to change in the corridor, his request was politely declined. Iceland doesn’t really do VIP rooms. This is a stubbornly egalitarian society. Titles and honorifics are frowned upon. Everyone is on first-name terms. Sorry Cristiano, old bean.

Ronaldo didn’t seem too disturbed, spanking in a 40-yard free-kick three minutes into a game Portugal won at a stroll. That was six years ago, 12 months before the appointment of Lagerback, year zero for the Icelandic qualification miracle. Not that Iceland’s thrillingly inscrutable Swedish manager really wants to talk about miracles.

Instead he coughs and mutters and changes the subject. This is probably all for the best. After qualification, one newspaper described Iceland’s manager, rather hopefully, as “a liberator of the volcanic island”. Lagerback is adored in Iceland. But volcanic liberation has never really been his bag.

“Number one is the group of players are really good,” he says. “For the last year you are starting to see the emerging players, the younger ones definitely benefited as they moved up. The quality is growing all the time. If you look at the last five years the youth national teams are really getting better.”

The only concession to magic and sparkle comes when Lagerback talks about Gylfi. “Oh yes, he really is a top‑class player,” he says, with the proud purring enthusiasm of a fond uncle. “He is what I call a two-way midfielder, he plays when you attack but also when your team doesn’t have the ball. That is what makes him unique. I would say he could play in any team.”

Lagerback is 67 now. His contract ends after the Euros, when he will hand over to his assistant, Heimir Hallgrimsson, who, in the stubbornly unstarry Icelandic tradition, is not only not a famous ex-footballer, but still works as a dentist in his home village.

Lagerback of the stifling five-man midfield led Sweden to five tournaments before taking the Iceland job. At which point, in a most un-Lars move, he announced that he expected them to qualify for the next World Cup.

Advantages of a small country

“I thought he was mad,” Hallgrimsson has said. Three years later only a 2-0 play-off defeat to Croatia denied Iceland a spot at Brazil 2014. The source of Lagerback’s confidence was that flush of talent, the first buds of the boys from the indoor halls, fruits of what he identifies as a notably academic, open style of coaching from the artificial grassroots up.

“Part of the real success here even at the top level is they have very educated coaches starting at five or six years of age,” Lagerback says. “The system is very good. You can see they are really pushing on the development of talented players at the clubs. If you look at our squad for the Euros, and look at the younger players I would definitely say these are well educated.”

The current team is a mix, with a spine built around the traditional home-made jumble of Icelandic footballers. Hannes Thor Halldorsson, the goalkeeper, has played at nine clubs and also works as a film director. He did the video to Iceland’s Eurovision song contest entry four years ago. Even Eidur Gudjohnsen, a player of such prodigious physique and talent he was bullying top-tier professionals aged 16, was basically a freak storm of ability and opportunity who spent his formative years in Belgium.

The new breed are a more orderly, cosseted bunch. Most leave the country once they make the grade, another hothoused export industry to go with the experimental crop that briefly made Iceland the chief exporter of bananas in Europe some years back. Kolbeinn Sigthorrsson made his first-team debut for Vikingur at 16, had trials with Arsenal and Real Madrid, and then bloomed at Alkmaar. At the other end of things Jon Dadi Bodvarsson comes from Selfoss, a town of only 6,500.

Selfoss was struck by a massive earthquake in 2008. No people were killed. Just sheep. Selfoss does, though, have a state of the art full-sized football hall. And now it has Bodvarsson, a rare Icelandic league late bloomer.

For all the alluring backstory, questions still remain. Chiefly there is that brittleness. Iceland are ready. Iceland have a great system. But are they actually any good? Most riffs on this story tend to overlook the fact Iceland had plenty of luck in qualifying.

The expanded tournament helped. Other teams played poorly. Iceland tended to sit behind the ball, scoring from knockdowns and set pieces. Even in the key home defeat of Holland they had 26% of possession.

Looking back now that game still has the feel of a luscious one-off. There is some great insider footage of the celebrations in the dressing room. Iceland’s players are in there bobbing up and down like a bunch of non‑leaguers ecstatic at being drawn against Everton in the third round of the Cup, a reminder of the miniature scale of this obsessive social experiment.

“It is actually an advantage this is a very small country,” Lagerback says. “You can find things and make them work in a country like that. In terms of character the difference from other Nordic countries is they are a little bit more individual. If you want something to happen you take care of it yourself. In that way it has been very easy to work with these guys.”

At which point Lasse, Iceland’s favourite Swede, does finally melt a little. “Of course it has been a real privilege to take part in this process. It’s a very small country, no one expected us to be there. It is a little bit special.”

Breidablik in Kopavogur has a great indoor hall. Photograph: Brynjar Gunnarsson/The Guardian

Spread of coaching expertise

Fine. But how have they done it? For once there is a fairly easy answer. This is a command economy kind of fairytale, managed from the top down. There are three clear strands. The first of these is coaching.

Arrigo Sacchi famously suggested elite coaching should be open to people from any walk of life, from elevator operators to stockbrokers. At the end of the last century the Icelandic FA put this into practice. Bolstered by the TV money pouring into every Uefa country, Iceland set up an open, hugely popular training scheme. Currently this nation of 335,000 has around 600 qualified coaches, 400 with Uefa B licences, or one per 825 people. To put this into context, in England this number falls to one per 11,000.

The result is a spread of expertise right down to the lowest level. “Here you need a Uefa B licence to coach from under-10 level up and half of the Uefa B licence to coach under-eights,” Dagur Sveinn Dagbjartsson of the Icelandic FA says. This isn’t simply box-ticking. The Uefa B is one step off the level needed to coach a professional team in England. Yelling dads it ain’t.

Dagur is coordinator of the Icelandic FA’s coach education programme. Boyish and studious, like so many other people around here he has a genuine fascination with the systems being put into place. “Even if you start training at four years old you get good quality coaching. Every coach in Iceland gets paid, we don’t have any amateurs. Every kid who plays pays an annual fee and can go and train with a professional club. My own kid started when he was three. One coach had the Uefa A licence and one the B licence.”

The second strand is facilities. Iceland has brilliant ones. Football is rich. What, in the end, do you want to spend its money on? With TV money still stuffing its pockets, Iceland decided to do something else with this bonus. Something – and this is the key difference – actually useful.

Clubs and local authorities went into partnership, building unapologetically vast indoor football pitches up and down the country. The halls are heated, open to all and staffed by qualified coaches. They are, in their own way, the key to all this.

Finally, Iceland did something great with school football. The FA has been buying land next to schools and building pitches: enclosed timber-built, artificial-turfed pitches, paid for by money that might otherwise have ended up in some familiar dead end: unnecessarily showy mega-stadiums, executive salaries, another Bugatti in the garage.

On the way to visit the Breidablik academy, the Guardian’s Icelandic photographer leads us to a small school in Breidholt, a deprived area by Reykjavik standards. And there it is, a sheltered, faux grass rectangle tacked on to the neat little low-rise buildings and packed out with kids playing mixed games at break time. Football often gets a bad rap for its wastefulness and greed, its inane use of all that foaming, sluicing cash. It seems, though, there may actually be a choice in all this.

Steven Lennon, once of Rangers, has seen both sides. Lennon has spent four years in Icelandic football, two with Fimleikafelag Hafnarfjardar, for whom he scored the opening goal of the Icelandic season a few weeks ago. Strolling around the perfectly formed FH training facility he laughs at the idea of one of these public spaces popping up in Britain. “Yeah, there would be a couple of kids over there chucking bottles, a couple on a moped.”

Steven Lennon plays with FH in Hafnarfjordur near Reykjvik. Photograph: Brynjar Gunnarsson/The Guardian

A highly rated teenager, then a slightly troubled twentysomething, Lennon has the sharp, thoughtful, agreeably sarcastic manner of many talented British dressing-room exiles. Cut loose at Rangers he went to England, then Iceland then Norway, then back to FH, where he now has a young family.

There is a tendency to mythologise, to see Iceland as a kind of Vote Leave fantasy of Britain run according to cold, clear Scandi mini-series good sense. Lennon simply turned up as a footballer in search of a club. He still seems a little baffled at how well everything works. “When I was young I was running across busy roads, playing between the driveway gates. The kids here have access to coaches who have their Uefa badges. For us it was people’s fathers, volunteers, training once a week on a muddy school field.”

Lennon is interesting in this context, a player who seemed to be the wrong type (cocky, clever), the wrong shape (small, skilful) and too easily led into the casino culture to avoid the hard edges of the system. Nine years ago he scored a hat-trick as Rangers thrashed Celtic 5-0 in the SFA Youth Cup final at Hampden Park, but he played less than an hour in total for Walter Smith’s first team. He remembers as a 16-year-old training with the first team and being violently elbowed in the face by Barry Ferguson, the club captain, for the crime of pulling his shirt (“taught me a lesson”).

Could British football change, learn, adapt, pick apart the strands? Lennon has a bit of a laugh at this. “I don’t know. Maybe we’re just more greedy about it. There’s people back in the UK taking massive salaries for the same job they do in Iceland. People in those FAs, they’ve got massive egos and they want those high salaries. Whereas here they’re all about developing the game. So I don’t know. You’d have to see massive change. Maybe not just in football.”

Welcome to heaven

It’s no coincidence they ended up building football hangars in Iceland. Quite a lot of things here are variations on the idea of enclosure, putting a roof up, spreading some kind of meniscus over the land. It’s cold and spiky. You need somewhere to go.

This isn’t the first country to have full-scale football halls, which are a Scandinavian thing generally. But no one’s done it quite like Iceland, where the halls have become an object of fascination for anyone trying to pick away at this story. Look at them, the Icelanders. In their halls. Patiently overachieving.

A visit to Breidablik is a chance finally to visit this object of fascination, pilgrimage, vision of some frictionless future-world. Albeit one that from the outside looks a bit like a vast rural silage shed. Swishing through the airlock, clumping down the steps, the hall turns out to be a great, arching, softly lit cavern.

Dadi Rafnsson coach at Breidablik football club. Photograph: Brynjar Gunnarsson/The Guardian

And really this is all quite stunning, a carpet of thick-shag nylon turf, vast curved ceiling spreading from one end, the kind of space that makes you want to leap out into the middle and hammer a ball around, a place to make any kid’s pupils dilate just taking in all that green, green fake grass. Oh, Iceland. What have you been up to here.

“There was an English coach who came over last year and I think he hit the nail on the head,” Dadi Rafnsson says, sitting in a small office with a panorama across the hall. “His expression walking in here was ‘this is football heaven’.

“My theory on why we are achieving is that nowhere in the world do as many kids get to practise as much per week for as long with a qualified coach in such good conditions.

“For a little kid you come after school, the bus drops you here, you just play and have fun. Then the older guys from your school come, then at 6 o’clock the first team. So you have a lot of interaction with the whole community and the club. The coaches try to be more friends and teachers instead of being something else. There is discipline. But we don’t want them to be all the same, we don’t want them to be without characteristics.”

And finally here they are, Iceland’s chosen generation, the high-ability group of Breidablik’s six- to 11-year-old catchment. Scattering out around the goals and small pitches informal games are played in mixed groups as pretty much every kid here takes a turn to demonstrate their range of tricks, traps and flicks on that wondrous green shag.

Breidablik are one of Iceland’s new powers. Last year they won every men’s championship age group apart from under-14s. They won the title in 2010 with a team with an average age of 23. In this they were helped by the financial crash. As the money dried up an entire layer of overseas pros were creamed off. Clubs played their youth teams.

This is Breidablik’s strength. They won the league again in 2011. Welcome to Iceland, where even bankruptcy can work in your favour.

Breidablik also has a special place in the story of Iceland 2016. Gylfi isn’t the only member of Lagerback’s team to have been schooled in this hall. “He was on the same team as Johann Berg Gudmundsson and also Alfred Finnbogason,” Dadi says. “Their age group did well in national competition. One year they didn’t actually win it which was really funny.”

Is there a pressure now to keep producing? Not just to follow this, but to better it? “The feeling is just total enjoyment, total exhilaration. We see things have fallen into place for a reason. The foundations are strong. You feel like the result is there because of good things that have happened.”

Total enjoyment! Total exhilaration! Welcome to football heaven.

In the first gameweek KR and Vikingur Reykjavik met at the KR stadium. Photograph: Brynjar Gunnarsson/The Guardian

Beauty of Breidablik

At the Alvogenvollurinn stadium, home of KR Reykjavik, the sleet comes barrelling in sideways from the open side of the ground. The sky is a familiar post-nuclear grey above another genteel, weather-beaten neighbourhood, this one also home to Bjork, who is apparently often seen wandering around the local shops.

Iceland’s traditional powerhouse club, KR are playing Vikingur on a late winter pitch the colour of bleached pale green tartan. It is mercilessly cold, but the place still has a village fete-ish feel, packed with kids and dads as the club song, a lilting Italian Eurovision number, crackles out of the PA.

KR’s full name is Knattspyrnufelag Reykjavikur, which means Reykjavik Football Club. Knattspyrna is Icelandic for football, or literally “ball-kicking”. They have plenty of twentysomething homegrown players in the team today, none of them current internationals because all the current internationals go abroad. Holmbert Aron Fridjonsson, their ambling lamppost of a centre-forward was at Celtic for a bit. He is currently in recovery. Their opponents, Vikingur, were founded in 1908 by three boys aged 12, 11 and nine, with the intention of raising money to buy a ball. They have Gary Martin, once of Middlesbrough, in midfield. The game kicks off to a rattly cheer and then settles into a windblown, teeth-chattering affair of awkward bounces and the occasional menacing set piece. Meanwhile, across the way, out of the wind, a familiar figure appears in the crowd milling around the club offices.

Bjorgolfur Gudmundsson is here, former chairman of Landsbanki, former owner of Stoke City and West Ham. Landsbanki is a pretty toxic subject. When the financial system collapsed in a sea of uncontrolled credit it was the insolvency of Landsbanki, the country’s second biggest company, that really caught the mood.

Iceland went into a spasm of furious restitution. There were demonstrations outside the parliament by people banging pots and pans, the Kitchenware Revolution that eventually drove out the government. A slew of bankers were imprisoned. Most of them are free again. Gudmundsson didn’t go to prison. He is just one of the ghosts now, not reviled or hated, but carrying some of the stain of that generation.

And yet the odd thing, when it comes to football, is that Iceland’s greybeard financial pirates are in their own ways the godfathers of all this. Waste, penury and anger may have followed them. But so did football, high-grade development structures, the artificial turf at Breidablik. Most things are about money in the end.

At the end of which it is hard not to draw the comparison with England. If only because of the natural polarity between football’s greatest overachievers, all clean lines and clean thinking, and the nation at the other end of that scale, stodgy, cramped, frenetic old England, a muddle of waste and trapped energy.

Icelanders are keen on talking about having the things you need, but also of not having the things you don’t need. People worry about details. For example, there is a continuing concern about the gentrification of Reykjavik city centre, the transformation of the main shopping street into a rat-hawking tourist trap, chain restaurants and all the rest of it. Ready to be fleeced and swamped, I wandered cautiously along Laugavegur past the lovely independent shops, the clean, friendly streets and ended up in a fun hipsterish bar called the Lebowski, where they serve Tuborg and the craft burgers are named things like The Walter (I ordered The Nihilist). Just a thought, but they’re probably OK for now on this front.

This is an attitude as much as anything else. The things you need, but not the things you don’t need. The most obvious application of that clean, clear Icelandic model in England would be to go back in time 15 years and cancel the construction of the new Wembley. Spend that £757m instead on land, facilities, spreading the ability to participate. Put a proper, workable, open all-weather public pitch in every town and village. Watch as all those other solutions to the same old problems dissolve in its wake.

Things like this have happened in Britain before, most notably in the decades after the second world war, when athletics tracks and swimming pools and leisure centres were built in clusters up and down the country. It couldn’t happen now. The politics of unified small-island ambition simply can’t apply to our own shemozzle of divided interests, the rise of the market ideology across every aspect of public life. You get the strangled greed-ridden footballing systems you deserve.

On the pitch at the Alvogenvollurinn the second half is a slow congealment towards a scoreless draw. The players continue to look like footballers anywhere, just with slight Nordic variations on the usual hairdos and coloured boots. KR’s Ingrid Sigurdsson, a small, bald burrowing central midfielder, has something eager and mole-like about him. Vikingur have a head-banded fancy boy who looks like he has just stepped out of late‑90s Serie A and who turns out to be Middlesbrough’s own Gary Martin.

Otherwise most of these footballers are boys from the halls, the ones who didn’t get away. Here they are instead, barfed out by this remarkable design project and hurled out on to a cold, wet blasted field to keep the league rolling along, a background to the export industry.

This is of course an unfinished story. There is no reason that the football factory can’t continue to function beyond Portugal in Saint-Étienne on Tuesday, then Hungary in Marseille and Austria in Saint‑Denis. Part of the fascination here is not just the brittleness, or the basic novelty but the sense of hope in Iceland’s managed miracle, a saga of halls, heroism and meticulous small‑island obsession.