Back in Ultima V, LB's castle is surrounded by the Britannies, settlements which grew up around it, largely in order to supply the people living there. It disappeared in later games, and LB's castle moved closer to Britain, so it actually became part of it.

However, for the purposes of the story, I couldn't really see LB riding at the head of the Britain army, ready to make war on Moonglow (which is why he effectively has his own faction - he'll start with Britanny and Serpent Hold, as he effectively commands the Order of the Silver Serpent). It just seemed to make more sense to return to having Britanny and Britain as being separate.