I think a large part of the problem is the fact that naming of empires/nations/whatever they are in the civ games is extremely oversimplified and therefore just plain wrong most of the time. Very few of these political organisations called themselves "The ______ Empire". Naming is much more complex than that.
Yet the civ series uses Egyptian Empire, Russian Empire, American Empire for simpilicity. So, the equivalent of the real-life USSR, if it develops so in the game, is called "Russian Empire". Of course this is wildly inaccurate, as many other nationalities had a stake in as well, and many leaders came from other nations as well. But it is also the most accurate name possible - because it was mainly Russians who caused the USSR to be. It is certainly better than "USSR" or "Soviet Union" (imagine how that would look in 1000AD)!
Similarly, the "United Kingdom of Great Britain and Ireland" (later "...Northern Ireland") and its erstwhile empire is represented in the game, over-simply, as "English Empire" -- and while this is inaccurate, it is better than calling it "Britain" or "British Empire", which would look especially silly in the early stages of the red team's development, and even in the later stages if they didn't manage to conquer Britain and Ireland.
Agreed, calling the present-day UK "England" is offensive, or more to the point, not true. But calling it "the English Empire" has some truth to it -- it was the English who were mainly responsible for creating that empire. They, of course, were not stupid enough to call it the English Empire, and neither were the creators of the USSR stupid enough to call theirs the Russian Empire. Nor did the creators of the Greater East-Asian Co-Prosperity Sphere call theirs the Japanese Empire. And on and on.
So, yes, these "Empire" names are offensive (and thus were not used in real history), but they are honest. And they are the way the game names the teams. For now.