Five years after Britain left the EU, the full impact of Brexit is still emerging

Five years ago, two groups of people gathered near the British Parliament—one waving British flags and cheering, the other holding EU flags and weeping. On January 31, 2020, at 11 p.m. London time (10 a.m. on February 1st, Australian Eastern Daylight Time), and at midnight at the EU headquarters in Brussels, the United Kingdom officially left the European Union, ending nearly fifty years of membership with 27 European countries involving free movement and free trade.

For Brexit supporters, the UK is now a sovereign nation in control of its own destiny. For opponents, it is an isolated and declining country. Undeniably, it is a divided nation that has taken a leap into the unknown. Five years on, people and businesses are still grappling with the economic, social, and cultural fallout.

“The impact has been really profound,” said Anand Menon, a political scientist and head of the think tank “UK in a Changing Europe.” “It has changed our economy, our politics has fundamentally changed,” he added. “We are seeing new divisions around Brexit becoming part of electoral politics.”

The UK, an island nation with a strong sense of historical importance, had long been an uneasy member of the EU. In June 2016, the UK held a referendum on whether to remain in the EU. Decades of deindustrialization, coupled with years of public spending cuts and high immigration rates, provided fertile ground for the argument that Brexit would allow the UK to "take back control" of its borders, laws, and economy. However, the 52% to 48% result in favor of leaving shocked many. Neither the Conservative government, which advocated remaining in the EU, nor the pro-Brexit campaigners were prepared for the complex details of leaving.

The referendum was followed by years of wrangling over divorce terms between a wounded EU and a divided UK, leading to parliamentary gridlock and ultimately the defeat of Prime Minister Theresa May. She resigned in 2019 and was replaced by Boris Johnson, who vowed to "get Brexit done." The UK left the EU without an agreement on its future economic relationship with the bloc, which accounted for half of the country’s trade. The political separation was followed by 11 months of intense negotiations over the divorce terms, which were finally agreed upon just before Christmas 2020.

The basic trade deal took the UK out of the EU's single market and customs union. This meant that goods could flow without tariffs or quotas, but it also brought new red tape, costs, and delays for trading businesses. “It has cost us money. It’s certainly slower and it’s more expensive. But we’ve survived,” said Lars Andersen, head of London-based My Nametags, which ships brightly colored children's clothing and school supply labels to over 150 countries. To continue trading with the EU, Andersen had to set up a base in Ireland, through which all orders to EU countries must pass before being dispatched. He said the hassle is worth it, but some other small businesses he knows have stopped trading with the EU or moved production outside the UK.

Julianne Ponan, founder and CEO of allergy-free food producer Creative Nature, saw her growing export business in EU countries severely hit by Brexit. She has since successfully pivoted to markets in the Middle East and Australia, which she says is a positive outcome of leaving the EU. Having mastered the new red tape, she is now gradually rebuilding her business with Europe. “But we lost four years of growth there,” she said. “We would have grown faster if Brexit hadn’t happened.” The Office for Budget Responsibility forecasts that in the long term, UK exports and imports will both be about 15% lower than if the UK had remained in the EU, and economic productivity will be 4% lower than it otherwise would have been.

Brexit supporters argue that the UK has new freedom to strike trade deals with countries around the world, which will offset the short-term pain. Since Brexit, the UK has signed trade deals with countries including Australia, New Zealand, and Canada. But David Henig, a trade expert at the European Centre for International Political Economy, said that these deals have not offset the hit to the UK's trade with its near neighbors. “The big businesses are not that affected,” Henig said. “We still have Airbus, we still have Scotch whisky. We still do defense, big pharma. But the medium-sized businesses are really struggling to maintain their export position. And we are not seeing new businesses coming in to set up.”

In some ways, the outcome of Brexit has not been what either supporters or opponents expected. The COVID-19 pandemic and Russia's invasion of Ukraine have delivered greater shocks to the economy, making it harder to disentangle the effects of Brexit on the economy. In the key area of immigration, the impact of Brexit has been the opposite of what many predicted. Reducing immigration was a key reason many voted to leave, but immigration is now far higher than it was before Brexit, as the number of work visas issued to workers from around the world has surged. Meanwhile, the rise of protectionist political leaders, especially the new US President Donald Trump, has increased the risks for the UK, which now finds itself caught between its European neighbors and its transatlantic “special relationship” with the US. “The world is a much less forgiving place now than it was in 2016 when we voted to leave,” said Menon.

Opinion polls show that public opinion in the UK about Brexit has soured, with a majority now believing it was a mistake. But rejoining seems a long way off. With the memories of the arguments and divisions still fresh, few are keen to go through it all again. Labour Prime Minister Keir Starmer, elected in July 2024, has pledged to “reset” relations with the EU but has ruled out rejoining the customs union or single market. His aim is for relatively modest reforms, such as making it easier for artists to tour, for professional qualifications to be recognized, and for closer cooperation on law enforcement and security. EU leaders have welcomed the shift in tone from the UK, but they themselves are facing growing problems with populism across Europe. The UK is no longer their priority. “I fully understand that after a fairly acrimonious divorce, it’s hard to get back together,” said Andersen, but he still hopes the UK and EU will grow closer over time. “I suspect it will happen, but it will be slow and subtle, and without politicians shouting about it.”