The sudden flurry of activity in Brussels over the weekend served as a salutary reminder that “nothing is agreed until everything is agreed” when it comes to Brexit. Indeed, that seems to be true within the UK cabinet itself, since it seems that, one way or another, events in Westminster pulled the rug out from under the talks in Brussels. A painfully complex but potentially face-saving compromise to the vexed question of the status of Northern Ireland after Brexit appears to be farther away than ever.

Why would the EU limit the pain when its priority will remain satisfactory resolution of the withdrawal issues?

And so, despite the fact that all of those who ostensibly control the process – the UK government and parliament, the European commission, the EU27 member states and the European parliament – actually want a deal, there remains a very real prospect of the UK leaving the EU without one on 29 March 2019.

Serendipitous indeed, then, that the thinktank Open Europe has published a new report entitled “No Deal: the economic consequences and how they could be mitigated”. And there’s good news. The report finds that a no-deal Brexit will only cost the UK 2.2% of GDP over 15 years, and that if we unilaterally liberalised our own trading regime that cost could be reduced to 0.5% of GDP. Even better news, the report uses mainstream modelling techniques and assumptions that, while certainly debatable and arguably overoptimistic, are not as bad as some. They are not remotely comparable to the simple factual, logical and legal errors that enabled some “economists for free trade” to produce projections that no serious trade economist regards as credible at a Commons event.

So, if no deal has only a relatively modest economic impact, what’s the bad news? It’s that the report – despite its title – is not about no deal at all. Indeed, Open Europe’s director conceded as much. What the report models – and, to be fair, the text itself is clear enough, even if the title is misleading at best – is the long-term impact of a move to a position where the UK trades with the EU on WTO terms. This is an outcome consistent with both a deal and no deal. It is all too easy to envisage a situation in which the UK signs a withdrawal deal with the EU but then, for whatever reason (incompatible negotiating positions, problems ratifying a deal in the EU, problems ratifying it in the UK), fails to agree a trade deal. This would result in a “trading on WTO terms” outcome.

But the no deal that is in prospect now is what happens if the UK and the EU would fail to agree, or to ratify, a withdrawal agreement between now and March 2019. Of course, one implication of this would be that the UK and EU would have to trade on WTO terms. But that is just the destination, not the journey. As we explained in our recent report Cost of No Deal Revisited, the immediate impact here relates not to the longer-term trading arrangements the UK develops, but, rather, to the short-term uncertainties, the political implications and the timescale under which this would happen.

First, no deal would create massive uncertainty owing to the disappearance of many of the rules underpinning the UK’s economic and regulatory structure. This is why people worry about whether aircraft will be able to take off. The rules governing flights between EU countries are EU rules, and they will cease to apply the moment we drop out with no deal.

Less obviously but no less importantly, no deal implies chronic uncertainty about contracts. Again, it is EU law that provides the framework within which a UK trader can trade with Germany and expect the EU to protect her in the event that her German counterpart defaults on the deal. Following no deal, legal rulings in the UK would carry no force in other member states.

Add to this the politics. A no-deal outcome would be ugly and would doubtless involve much mutual recrimination from both sides. This will have implications way beyond economics (security collaboration might conceivably be one crucial victim), but when it comes to trade, the angry and hostile mood would surely militate against the kinds of mitigations that might limit the impact of no deal. Why would the EU try to limit the pain when its priority will remain satisfactory resolution of the withdrawal issues – the Brexit bill, citizens’ rights and the Northern Irish border?

And, finally, there is timing. In the event a withdrawal agreement is signed, the UK would have an additional 21 months to prepare for life under new trading arrangements, whatever they may be. In the event of a no deal, this would begin in March 2019 – long, long before either the UK or EU member states put in place the physical and other infrastructure necessary to make trade under WTO rules work effectively.

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We don’t blame Open Europe for not attempting to model the economic impacts of this outcome. We said in our own report that it would depend on what, if any, mitigations were put in place: but that a severe recession, while not inevitable, is clearly a possibility. The Office for Budget Responsibility agreed, saying last week that quantifying the impacts was “next to impossible” – but noting that the “three-day week” in 1974 reduced GDP by 3% in just one quarter.

That being said, we do think more care should have been taken in specifying what this report is about, particularly in a context where no deal – in our sense – seems a pretty plausible outcome of this process. Should Britain leave the EU without a withdrawal agreement, then the immediate economics – and politics – of this would be far, far more disruptive and damaging than the Open Europe report implies.

• Anand Menon is director of the UK in a Changing Europe initiative and Jonathan Portes is its senior fellow