This is extremely bad news for the USSR.
In the immediate, short-term situation, Germany now has open seas and can resume importing oil from the Americas, rubber from the Far East, and coal from Britain; which means that occupied France is more able to be resource-positive (in reality, France - dependent on imported oil and coal - was terribly unproductive under German control) and more generally, the shortages of fuel and tyres that crippled German efforts at wider mechanisation are alleviated.
Without war with Britain, Germany is not distracted by the Mediterranean, North Africa, and Greece; either the Italians don’t kick off, or Germany tells them “you started it, your problem, you’re on your own”.
Peace with Britain, under Halifax, leaves a lot more room in the US for Germany to seek aid, or at least trade.
The Luftwaffe doesn’t end up reduced by a good 25% of its strength in the summer of 1940, so is significantly stronger in the spring of 1941 (instead of having barely made good its losses during the Battle of Britain and Blitz). And, with more abundant fuel supplies, the pilot training programme is wider, with more trained manpower coming through.
Peace with Britain means no need for a massive U-boat construction programme: at that point, about 20 a month, with each Type VII submarine using the steel and skilled labour of a battalion’s worth of Panzer IVs - this frees up a lot of steel and manpower (serving and industrial) for other tasks.
When Germany does strike East into the USSR, there’s no Anglo-US aid to Stalin, while the Germans have more fuel and more motor transport (even without US supply or purchases, they haven’t diverted large quantities of MT - and the fuel to run it - to North Africa) so the German advance will be faster, with fewer of the “tactical pauses” as the spearheads outran their supplies. Worse, the Soviets will not get the urgent infusion of British tanks in the winter of 1941 (other than light tankettes, a good third of the medium and heavy tank strength that, in real life, defended Moscow had just come from Britain).
As the fighting continues, Germany continues to have advantages from “fighting on one front”. The incessant fuel shortages are much eased by access to imports. When T-34s and KV-1s make their presence known, Germany is more able to deal with them: tungsten-cored AP munitions work, and Germany can import tungsten. Worse, the USSR is not getting the infusion of Western support (10–20% of their combat aircraft and AFVs, a horde of motor lorries, hundreds of locomotives - which the Soviets had stopped producing to prioritise AFVs - and essentials from food to armour plate to explosives to Spam…)
A smart Germany is banging the drum in the US about how this is an existential struggle between white Christian civilisation and the satanic hordes of International Communism, with cheerleaders like Henry Ford, Charles Lindbergh and Joseph Kennedy urging the US to sell stuff to Germany, then to enact a “Lend-Lease” programme to keep the godless Bolsheviks far from decent white folks. A really smart Germany, in December 1941, is declaring war on Japan; placing the Bismark, Tirpitz, Scharnhorst and Gneisenau at the disposal of the US Navy; and negotiating refuelling and passage with the British to get Type IX U-boats out to the Pacific (odds are that Britain and Germany find themselves reluctant co-belligerents against Japan in this scenario)
A warily neutral Britain, means no Strategic Bombing Offensive. By 1943 this is really helping Germany; none of the disruption and lost production caused by air attack, as Speer’s figures show (blue line) compared to the pre-bombing predicted increase (red line)
The even bigger issue with this, is not the extra production: but the fact that by mid-1944 the Luftwaffe had basically been obliterated by the USAAF’s escort fighters, and Germany was investing 50% of its war effort in “trying to resist the bombing” (AA guns and ammunition - 16,000 88mm shells per bomber downed! - plus fighters, shelters, dispersion of production, underground facilities…) - none of which are necessary without the USAAF raising a pillar of smoke by day, and the RAF igniting a column of fire by night over Germany’s industrial centres.
Add to that, the 30% of German production devoted to the Kriegsmarine, almost all of it in submarines (convincing they were “tying down vast Allied resources”, Doenitz demanded production of forty Type VII U-boats a month, the equivalent of ten divisions of Panzers every month, and also persuaded Albert Speer to launch a massive programme to build the new Type XXI (much bigger, more complex and more expensive; nearly 300 were started, about 120 assembled, each of them equivalent to forty Panther tanks) - which is a much lower priority if Germany is not trying to cut the Atlantic sea lanes.
And, of course, there’s no “Tunisgrad” in North Africa, no fall of Sicily, no invasion of Italy, and no Operation OVERLORD/DRAGOON to draw off German forces, who can (barring some efforts, probably mostly naval using existing resources, against Japan to keep the US on-side) concentrate entirely on the USSR.
So, without Britain in the war, Germany can be reasonably expect to be much better supplied with the essential means of war like oil, rubber, coal and grain; its war production will be a good 30% higher in the summer of 1944 than it was, and land warfare could conservatively be getting over twice the share of the Wehrmacht’s efforts than it historically got at that point.
So, it’s entirely plausible that the Heer on the Eastern Front will have at least three times the supply of tanks, trucks, shells, bullets, aircraft et al and enough fuel to run them (and all of it going East); without the distraction of trying (and failing) to hold the Mediterranean, and build, garrison and defend the Atlantic Wall; not losing the Luftwaffe against USAAF fighters; will not be having industrial districts remodelled by HE and incendiaries; and will not be producing, and losing, forty U-boats (and their crews) a month; all pitted against a USSR that’s struggling much more than in real life with its logistics and mobility, without the torrent of Western assistance they’d historically received.
It becomes considerably more plausible that Germany actually does succeed in basically pushing the USSR back behind the Urals, with a wide “hostile zone” where Soviet moves towards the Archangel-Astrakhan line can be seen and struck from the air and defences mustered to stop them.
After that? It becomes a political, not a military, issue, with many “what might have changed?” questions.
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