Since America has left England, the British nation has fallen into depression. To forget his loneliness, he began to imagine fairies, as Yousei-san, unicorns, etc… He became totally desperate, since America is the only one he have loved, as his little brother.
So, England is depressed. Deeply and darkly. He couldn’t get through it, so he imagine friends who would be here for him forever. He’s in an eternal loneliness. And he’s schizophrenic, as all these “friends” are only hallucinations.