Germany’s leading economists have urged the EU and Germany to try to halt Brexit or at least contain its fallout, saying the best outcome of the divorce talks would be for it not to happen.

The German government’s independent council of economic advisers said in its annual report the worst of the impact of Brexit on both Germany and the EU would be political rather than economic.

“An exit of the United Kingdom from the EU would not only mean an economic loss, but above all a bigger political loss,” they wrote. “The best outcome of the upcoming negotiations would therefore be if a Brexit could be averted.”

The panel of five economists, set up in 1963 to advise the government, said Brexit might still be preventable even after the British government has triggered article 50 to begin the two-year exit proceedings, which Theresa May has said she will do before April next year.

“Due to the consequences, politicians should not assume too soon that Brexit is a done deal,” they wrote, adding that if it did go ahead Britain should not be allowed to “cherry-pick” which of the EU’s four fundamental freedoms – including freedom of movement – it wanted to respect.

“Constructive negotiations” might still prevent Britain leaving, the council said, or at least produce “a succession agreement that minimises the damage for both sides”.

Although concessions on points of detail should not be ruled out, an “over-lenient” approach in negotiations might encourage others to follow the UK out of the union with “unforeseeable consequences” for the bloc’s future stability, they warned.

The council said a major downside of Brexit for Germany would be that the EU would be losing “one of the most market-oriented member countries”, but said the short-term economic impact on Germany would be moderate.

The council chairman, Christoph Schmidt, said after presenting the report to chancellor Angela Merkel that the longer-term economic effects were hard to identify. “The biggest impact will be on the United Kingdom itself,” he said.

The council’s advice to try to prevent Brexit runs counter to the current mood in both Berlin – where Merkel has said the EU must respect the British vote and face “the reality” of Brexit – and London, where May has repeatedly said that “Brexit means Brexit” and Britain is leaving the EU.

Merkel told reporters after receiving the report that the EU’s four freedoms – movement of goods, services, capital and labour – were non-negotiable and must form the basis for Brexit talks, but added she hoped relations with Britain remained “good and friendly” and negotiations would not lead to frictions with the EU-27.