The expected buy-out rush before April’s capital gains tax changes was in fact a minor jolt for the first three months, when activity hit a ten-year low.

According to new research from financial adviser Grant Thornton there were just £7.01 billion UK domestic deals in the first quarter, 40 per cent less than in the same period last year (£12.53 billion) and the lowest quarterly value in more than four years. It was also the first quarter that acquisitions fell below 400 for more than a decade, with just 377 M&A deals announced.

Grant Thornton Corporate Finance’s head of M&A David Brooks said the weakness in announced M&A was an inevitable consequence of a protracted credit squeeze, as the lending environment for all but the most ‘risk-light’ deals became a much more convoluted environment.

“Analysing announced deals allow us to gain a strong indication of the year ahead, and unfortunately it is a far more subdued M&A environment than the past three, bullish years.

“After a small M&A bump caused by the change in capital gains tax, it seems the companies that have in the recent past pursued an aggressive acquisition strategy have become much more circumspect, while those companies that had been toying with the idea of acquisition for expansion are now shelving plans, particularly in those sectors that are struggling.”

Sectors including food and beverage retailing, healthcare and professional services all fared well in the first wuarter, but according to Brooks the banking sector has yet to show significant M&A activity this year after a strong 2007.