When the United Kingdom voted to leave the European Union in 2016, few could have anticipated the far-reaching consequences that would unfold for businesses and citizens across the continent. Brexit officially took place on 31 January 2020, with the UK leaving the EU single market and customs union on 1 January 2021. This monumental shift in European politics has created a complex web of challenges and opportunities that continues to evolve. As IKM Milano‘s research indicates, the implications extend far beyond political boundaries, affecting trade relationships, freedom of movement, and the daily lives of millions of Europeans.
Brexit’s effect on EU businesses
The departure of the United Kingdom from the European Union has fundamentally altered the business landscape for companies operating across these borders. EU businesses that previously enjoyed frictionless trade with the UK now face a significantly more complex operating environment, requiring adaptation strategies and new approaches to maintain competitiveness.
Supply chain disruptions and trade barriers
One of the most immediate consequences of Brexit for EU businesses has been the introduction of customs checks, additional paperwork, and potential tariffs when trading with the UK. These non-tariff barriers have disrupted previously seamless supply chains and added costs that many companies were unprepared to absorb. Some studies suggest that UK goods exports to the EU fell by as much as 30% following Brexit, while others indicate a more modest 6% reduction. Either way, the impact has been substantial, particularly for smaller enterprises without the resources to navigate the new regulatory landscape.
Many EU businesses that relied on just-in-time delivery systems have been forced to rethink their logistics. Some companies resorted to stockpiling goods before Brexit to avoid potential tariffs, while others have had to establish new warehousing facilities or distribution centres to maintain their market presence. The introduction of ‘red lanes’ for goods moving into the Single Market has added another layer of complexity, with full customs processes now required for products entering the EU from the UK.
Financial services and regulatory challenges
The financial services sector, a cornerstone of UK-EU economic relations, has faced particular challenges in the post-Brexit environment. The absence of comprehensive provisions for financial services in the Trade and Cooperation Agreement has led to regulatory divergence and complications for cross-border operations. EU businesses that previously accessed UK financial markets with ease now encounter additional requirements and potential restrictions.
The regulatory landscape continues to evolve as both the UK and EU adjust their frameworks. The UK has changed some EU laws and now has greater freedom in certain areas of tax law, which creates both opportunities and challenges for EU businesses operating in or with the UK. Although the UK initially incorporated thousands of EU laws, it has already axed approximately 600 EU laws by the end of 2023, with another 500 financial services laws set to disappear later. This regulatory divergence requires EU businesses to maintain dual compliance systems, adding operational complexity and cost.
Consequences for EU citizens
Beyond the business impact, Brexit has profoundly affected the lives of EU citizens, altering their rights, opportunities, and relationship with the United Kingdom. These changes have created new realities for millions of Europeans who previously moved freely between the UK and EU member states.
Freedom of movement restrictions and residency rights
The end of freedom of movement represents one of the most significant changes for EU citizens following Brexit. The days of simply relocating to the UK for work or study without any administrative hurdles are over. EU passport holders can now visit the UK for up to 90 days without a visa, but longer stays require appropriate permissions. Similarly, UK citizens visiting the EU face the 90-day Schengen zone limitation, with further restrictions coming through the EU’s Entry/Exit System in 2025 and the European Travel Information and Authorization System, which will cost €7 per application.
For EU citizens who were already resident in the UK before Brexit, the EU Settlement Scheme provided a path to maintain their rights. However, those arriving after the transition period face a points-based immigration system that prioritises skills and qualifications over EU membership. This fundamental shift has disrupted families, communities, and career plans for many Europeans who had envisioned futures that included easy movement between the UK and their home countries. The Common Travel Area between Ireland and the UK continues, allowing Irish and UK citizens special rights to live, travel, work, and study within it, creating a unique exception to the new restrictions.
Employment and educational opportunities
The labour market has undergone significant changes as a result of Brexit. There are now fewer EU workers in certain sectors, such as logistics, hospitality, and agriculture, which has contributed to supply chain problems across Europe. Businesses can no longer rely on the free flow of labour from the EU, which has driven up wages in some sectors but also created staffing shortages. EU citizens seeking employment in the UK now need work visas, and UK businesses must become approved employer sponsors to hire non-UK citizens.
Educational opportunities have also been affected. The UK’s withdrawal from the Erasmus+ programme means that EU students no longer have the same exchange opportunities in British universities. Although the UK has created the Turing Scheme as a replacement, it offers different benefits and operates under different principles. Additionally, EU students studying in the UK now face higher international fees rather than home student rates, making British education less accessible. This change has led to a decrease in EU student applications to UK universities, while non-EU international student numbers have actually increased since 2020.
The economic effects of Brexit continue to unfold, with the Office for Budget Responsibility estimating that the UK economy will be approximately 4% smaller in the long term than if it had remained in the EU. This reduction, equivalent to around £100 billion, reflects the impact of increased trade barriers and changes in immigration patterns. While the UK no longer makes budget contributions to the EU (which were around £18.3 billion gross in 2019-20), it has had to replace EU agricultural payments and structural funding with taxpayer funds. The net fiscal benefit to the UK from not paying into the EU Budget is approximately £9 billion per year, though the UK did pay a net amount of £14.9 billion between 2021 and 2023 as part of the Brexit Withdrawal Agreement.