In 2016, the impact of Brexit on the European Union (EU) was expected to result in social and economic changes to the Union, but also longer term political and institutional shifts. The extent of these effects remain somewhat speculative until the precise terms of the United Kingdom's post-Brexit relationship with the EU becomes clear. With an end to British participation in the EU's policies on freedom of movement of goods, persons, services, and capital, and the European Union Customs Union, as well as sharing criminal intelligence and other matters, there is a clear impact with consequences for both institutions.

Size and wealth In 2018, the UK had the fifth highest nominal GDP in the world and the second largest in the EU.

Brexit resulted in the EU experiencing a net population decrease of 13% between 1 January 2019 and 1 January 2020. Eurostat data suggests that there would otherwise have been a net increase over the same period.

Comparison (2018) Population Area (km2) Density (per km2) GDP (Eur) GDP per capita (Eur)European Union (with the United Kingdom) million trillion European Union (without the United Kingdom) million trillion

Budget

The UK's contribution to the EU budget in 2016, after accounting for its rebate, was €19.4 billion. After removing about €7 billion that the UK receives in EU subsidies, the loss to the EU budget comes to about 5% of the total. Unless the budget is reduced, Germany (already the largest net contributor) seems likely to be asked to provide the largest share of the cash, its share estimated at €2.5 billion.From trade to migration - how Brexit may hit the EU economy, Reuters 24 June 2016

, debate continues between those members who wish the budget to be limited to no more than 1% of members' combined GDP and those who want it to be 1.074%.

Readiness In response to Brexit, the European Commission issued a communication on readiness named: "Communication on readiness at the end of the transition period between the European Union and the United Kingdom".

Policy changes

The UK was a major player in the EU which served as both an asset to the Union, but also a hindrance to those who supported a direction firmly opposed by the British government.

Ideological shift As the EU's third most populous state, with over 12% of the Union's population, the UK was an influential player in the European Parliament and the Council of the European Union. Its absence will impact the ideological balance within the EU institutions. Council In the council, during the UK's membership there were two blocs, each capable of forming a blocking minority against the other: the protectionist bloc of mainly southern states and the liberal bloc of mainly northern states. As a member of the latter, the UK's departure will weaken the liberal bloc as the UK has been a sizeable and fervent proponent of an economically liberal Europe, larger trade deals with third countries and of further EU enlargement. While weakening the liberal bloc, it will also strengthen Germany's individual position in the Council through the loss of a key counterweight. However, Germany remains uneasy about this role lest other member states anxious of German dominance may be more tempted to ally against it.

European Parliament

In the European Parliament, Brexit led to changes in group representation: Brexit gave 5 seats to the EPP and 3 seats to the ID, while 29 seats were lost by the NI (including Brexit party) 11 seats lost by the Renew Europe (LibDem) 7 seats losts by the green, and six seats lost by the alliance of socialists and democrats (S&D).

Similarly, a majority of the UK's representatives sat with right-leaning groups, namely the European Conservatives and Reformists and the Europe of Freedom and Direct Democracy, both of which were built around, and led by members of, the British Conservative Party and UKIP. The Progressive Alliance of Socialists and Democrats also lost its members from the UK's Labour Party, but on the whole would be left strengthened by the greater loss to the right, and thus able to form majorities without seeking support from the (conservative) European People's Party.

Defence and foreign affairs The UK was a key asset for the EU in the fields of foreign affairs and defence given that the UK was (with France) one of the EU's two major military powers, and had significant intelligence capabilities, soft power and a far reaching diplomatic network. Without the UK, EU foreign policy could be less influential. The US saw the UK as a bridge between the US and Europe, and the UK helped align the EU positions to the US and provide tougher policy towards Russia.THE IMPACT OF BREXIT ON THE EU, Centre for European Reform - Charles Grant, 24 June 2016

However, Brexit also produced new opportunities for the European defence cooperation, as the UK consistently vetoed moves in this direction, arguing it would undermine NATO. It attempted to do so again even after its withdrawal referendum, in relation to the establishment of a military HQ.UK to veto EU 'defence union', EUObserver 17 September 2016 With the UK's withdrawal and a feeling that the US under Donald Trump may not honour NATO commitments, the European Council has put defence cooperation as a major project in its [post-Brexit vote] Bratislava and Rome declarations and moved forward with setting up a European Defence Fund and activating Permanent Structured Cooperation (a defence clause in the Lisbon Treaty).Time for the Sleeping Beauty to wake, ECFR 15/NOV/17Angela Merkel: EU cannot completely rely on US and Britain any more, theguardian 28 May 2017

Freedom of movement Freedom of movement for workers is an integral part of EU policy and is a foundation of European Union ideals. In addition, the Schengen agreement removes the necessity for passports and visas for travel within the Schengen Area, thus allowing the free movement of people. This concept is designed to benefit the various member states' economy and society by allowing for business to thrive in Europe and also for the EU to be more culturally interconnected. (Visitors from outside the Area are subject to the usual passport and visa controls at the external border of any Area member state. Not all members of the EU are members of Schengen, and not all members of Schengen are members of the EU).

Eurozone

The relationship between euro and non-euro states has been on debate both during the UK's membership (as a large opt-out state) and in light of its withdrawal from the EU. The question is how Brexit might impact the balance of power between those in and out of the euro, namely avoiding a eurozone caucus out-voting non-euro states.

The UK had called for the EU treaties to be amended to declare the EU to be a "multi-currency union", which sparked concerns that to do so might undermine the progress of euro adoption in remaining countries.UK call for ‘multicurrency’ EU triggers ECB alarm, Financial Times 4 December 2015The Great British Euro Conundrum , Handelsblatt 20 June 2016What a fair relationship between ‘euro ins’ and ‘euro outs’ could look like, London School of Economics 26 January 2016The Eurozone seeks a post-Brexit balance, European Data Journalism Network 15 December 2017

Professor Simon Hix contended that Brexit would strengthen the Eurozone, which may well replace the single market as the EU's core and driving force. In the pre-referendum negotiation, David Cameron emphasised the importance (in his view) of keeping the Eurozone clearly distinct from the EU. Following a British withdrawal, such pressure may well dissipate.

Speaking English in the European Parliament

As a result of Brexit, there are now fewer native English speakers in the European Parliament and in workings groups. David McAllister, a German politician, stated that his former British colleagues are missed for their pragmatism, humour, and rhetoric. McAllister said that English is still the most common language spoken by members of the European Parliament despite it having 24 official languages.

Economic impacts Trade with the UK

After Brexit, the EU becomes UK's biggest trading partner, and the UK becomes EU's third biggest trading partner after the United States and China.

Some member states, notably Belgium, Cyprus, Ireland, Germany and the Netherlands, are more exposed to a Brexit-induced economic shock. The economy of the Republic of Ireland is particularly sensitive due to its common land border with the United Kingdom and its close agribusiness integration with Northern Ireland.Ireland: The forgotten frontier of Brexit Peter Foster, Europe Editor, The Daily Telegraph, 4 March 2017

The reintroduction of a customs border would have been economically and politically damaging to both sides,The Economic Impact of Brexit on UK and EU Trade, Richard Chen 14 June 2017Brexit: the impact on the UK and the EU , Global Counsel 23 June 2015 particularly because of the risk to the Northern Ireland peace process that a physical border presents. Brexit 'puts NI peace process at risk' - Hain Mark Devenport BBC News NI Political Editor, 5 September 2017 Despite protestations of good will on both sides, it was not obvious how border controls could have been avoided unless the UK has a Customs Union with the EU.What are the options for the Irish border after Brexit?, Georgina Lee, Channel 4, 29 Nov 2017Brexit: Customs union would solve Irish border, Carwyn Jones says First Minister of Wales, Carwyn Jones, speaking to BBC Wales, 04 Dec 2017 Arising from the agreements made at the Phase 1 negotiations (after the DUP intervention), any arrangements to be made to facilitate cross-border trade in Ireland will apply equally to cross-Channel trade but the details remain unclear.Brexit deal allows for three different types of Irish Border Katy Hayward, The Irish Times, 8 Dec 2017 In October 2019, the UK and EU renegotiated the Northern Ireland Protocol of the draft Brexit Withdrawal Agreement so as to keep open the border in Ireland and to have a customs border between the island of Ireland and the island of Great Britain (leaving Northern Ireland 'de facto' in the EU Customs Union in some respects).

The sectors across the EU that would be most hit by the UK's withdrawal are motor vehicles and parts (the UK is a large manufacturer and depends on an EU chain of supply for parts), electronics equipment and processed foods. Export of raw materials from the Ruhr valley would also be impacted.

Internal trade Ferry companies DFDS and CLdN have announced plans for new or additional direct services from Ireland to the mainland, avoiding anticipated delays and disruption on the traditional route via Great Britain.

Fisheries In May 2021, France threatened to cut off electricity to the British Channel Island of Jersey in a fight over post-Brexit fishing rights.

People EU migration or Freedom of movement The impact of this would be felt most on eastern European member states who have approximately 1.2 million workers in the UK by the end of 2015; the largest groups from Poland (853,000), Romania (175,000) and Lithuania (155,000). A year after the Brexit vote, net annual immigration to the UK fell by 106,000 with most attributed to EU citizens leaving for other states, with the biggest drop among those from the western European states.UK immigration latest: Net migration falls by more than 106,000 after Brexit vote as EU citizens flee, BBC 30 November 2017

The Polish government is encouraging its young emigrant workforce to return to Poland, but due to regulatory or political reasons many would either stay in the UK or move to other western cities such as Amsterdam or Berlin.Poland hopes Brexit guides star natives home, Politico 2 January 2017 Other western European member states may see much of the flow coming from eastern states in future. The influx of workers from the east would be economically beneficial to countries such as Germany, but may be politically problematic.