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—one waving British flags and cheering, the other holding EU flags with tears in their eyes. At 11 PM London time on January 31, 2020 (10 AM on February 1st Australian Eastern Daylight Time), and at midnight at the EU headquarters in Brussels, the United Kingdom officially left the European Union. Prior to this, the UK had been a member of the EU for nearly fifty years, enjoying free movement and free trade with the other 27 European countries.

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

Political scientist Anand Menon, head of the think tank "UK in a Changing Europe," stated: "The impact of Brexit is profound; it has changed our economy and fundamentally changed our politics. We are seeing new divisions around Brexit become part of electoral politics."

The UK, an island nation with a strong sense of historical responsibility, had long been an uneasy member of the EU. In June 2016, the UK held a national 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 regain control of its borders, laws, and economy." However, the result—52% in favor of leaving and 48% against—shocked many. Neither the Conservative government, which then advocated remaining in the EU, nor the pro-Brexit activists, were prepared for the complex details of a post-Brexit world.

Following the referendum, the EU and a divided UK engaged in years of wrangling over divorce terms, 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 country's trade. The political departure was followed by 11 months of difficult negotiations over the divorce terms, which were finally agreed upon just before Christmas in 2020. This basic trade agreement led to the UK's withdrawal from the EU's single market and customs union. This meant that goods could flow freely without tariffs or quotas, but it also brought new red tape, costs, and delays for trading businesses.

My Nametags, a London-based company that ships brightly colored children's clothing and school supply labels to over 150 countries, has felt the impact. According to the company's head, Lars Andersen, "It's certainly cost us money. We are definitely slower and it’s more expensive. But we have survived." To continue trading with the EU, Andersen had to set up a base in Ireland, through which all orders destined for EU countries must first pass. He says 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, had a growing export business in EU countries, but Brexit destroyed it. 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. "It's sad. If Brexit hadn't happened, we would have been further ahead."

The UK's Office for Budget Responsibility predicts that in the long term, UK imports and exports will be about 15% lower and economic productivity will be 4% lower than if the UK had remained in the EU. Brexit supporters argue that short-term pain will be offset by the UK's new freedom to strike trade deals globally. Since Brexit, the UK has signed trade agreements with countries including Australia, New Zealand, and Canada.

However, David Henig, a trade expert at the European Centre for International Political Economy, says these deals have not made up for the hit to the UK’s trade with its closest neighbors. "The big guys aren't really affected," Henig said. "We still have Airbus, we still have Scotch whisky. We still do defense, big pharma. But the medium-sized businesses have really struggled to maintain their export position. And there aren't new ones coming in."

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 exacerbated 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 major reason why many voted to leave, but immigration numbers are now far higher than before Brexit due to a surge in worker visas from around the world.

Meanwhile, the rise of protectionist political leaders, particularly the newly re-elected US President Donald Trump, has increased the UK's risks as it now finds itself caught between its European neighbors and its transatlantic "special relationship" with the US. "The world is far less forgiving now than it was when we voted to leave in 2016," Menon said.

Opinion polls show that British public opinion has soured on Brexit, with a majority now believing it was a mistake. However, rejoining the EU seems a distant prospect. With the memories of arguments and divisions still fresh, few want to go through it all again. Labour Prime Minister Keir Starmer, elected in July 2024, has promised to "reset" relations with the EU, but he has ruled out rejoining the customs union or the single market. His aim is to pursue relatively modest reforms, such as making it easier for artists to tour, having professional qualifications recognized, and closer cooperation on law enforcement and security.

EU leaders have welcomed the change in tone from the UK, but they also face problems of their own with rising populism across the continent. The UK is no longer a top priority. "I fully understand that it’s difficult to get back together after quite a brutal divorce," Andersen said, but he still hopes that the UK and the EU will grow closer over time. "I suspect it will happen, but it will happen slowly and subtly, rather than with politicians shouting about it."