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

Five years ago, two groups gathered near the British Parliament – some waving the Union Jack and cheering, while others held EU flags, tears streaming down their faces. At 11 p.m. London time on January 31, 2020 (10 a.m. February 1st Australian Eastern Daylight Time), which was midnight at the EU headquarters in Brussels, the United Kingdom officially left the European Union after nearly fifty years of membership. During this time, the UK enjoyed free movement and free trade with the other 27 European nations.

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 embarked on a journey into the unknown. Five years on, the public and businesses are still grappling with the economic, social, and cultural repercussions.

“The impact has been truly profound,” said Anand Menon, a political scientist and head of the think tank “UK in a Changing Europe.” “It’s changed our economy. Our politics have fundamentally changed. We see these new divisions around Brexit becoming part of electoral politics.”

As an island nation with a strong sense of historical importance, the UK 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, followed by 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% vote in favor of leaving versus 48% in favor of remaining shocked many. Neither the Conservative government, which advocated remaining, nor the pro-Brexit campaigners were prepared for the chaotic details of leaving.

Following the referendum, the EU and the divided UK spent years arguing over the terms of the divorce, leading to parliamentary gridlock and ultimately the resignation of Prime Minister Theresa May. She resigned in 2019 and was succeeded 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 UK's trade. The political departure was followed by 11 months of difficult negotiations on the terms of the divorce, which were finally agreed upon just before Christmas in 2020. This basic trade agreement saw the UK leave the EU’s single market and customs union. This meant goods could flow freely without tariffs or quotas, but it also brought new red tape, costs, and delays for trading businesses.

“It’s cost us. We’ve definitely slowed down, and it’s more expensive. But we’ve survived,” said Lars Andersen, head of London-based My Nametags, which ships brightly colored labels for children's clothing and learning supplies to more than 150 countries. To maintain trade with the EU, Andersen had to establish a base in Ireland, through which all orders destined for EU countries must pass. He says the hassle is worth it, but he knows of other small businesses that have stopped trading with the EU or moved production outside of the UK.

Julianne Ponan, founder and CEO of the allergen-free food producer Creative Nature, saw her exports to EU countries severely impacted by Brexit. She has since successfully pivoted to markets in the Middle East and Australia, which she says is a positive outcome of Brexit. 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 UK’s Office for Budget Responsibility forecasts that in the long term, both UK exports and imports will be about 15% lower than if the UK had remained in the EU, and economic productivity will be 4% lower than it would have been. Brexit supporters argue that the UK’s new-found freedom to strike trade deals globally 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, says these deals haven’t made up for the hit to trade with the UK’s near neighbors. “The big firms haven’t been that affected,” Henig said. “We still have Airbus, we still have Scotch whisky. We’re still doing defense, big pharma. But the medium-sized firms have really struggled to maintain their export position. And there aren’t new firms coming in to set up here.”

In some ways, the consequences of Brexit have not unfolded as either supporters or opponents expected. The COVID-19 pandemic and Russia’s invasion of Ukraine have brought further economic turmoil, making it harder to discern the economic impact of Brexit. 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 before Brexit, as the number of visas issued for workers from around the world has surged.

Meanwhile, the rise of protectionist political leaders, notably the newly re-elected US President Donald Trump, has raised the stakes for the UK, which is now caught between its European neighbors and its trans-Atlantic “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.

Polls show that public opinion in the UK has soured on Brexit, with a majority now believing it was a mistake. But rejoining the EU seems a distant prospect. With the memories of arguments and divisions still fresh, few want to go through it all again. Keir Starmer, the Labour Prime Minister elected in July 2024, has promised to “reset” relations with the EU but has ruled out rejoining the customs union or the 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 face their own problems amid rising populism across the continent. The UK is no longer a priority. “I completely understand it’s very hard to come back together after such a brutal divorce,” said Andersen, though he hopes that the UK and the EU will grow closer over time. “I suspect it will happen, but it will happen slowly and subtly, and without any politicians particularly shouting about it.”