Mergermarket's latest M&A rankings make for grim reading. While Freshfields Bruckhaus Deringer and Linklaters managed to top the European rankings for the first half of 2009 by value and volume respectively – with Linklaters also leading both rankings in the UK – overall activity levels continued to fall during the second quarter.

UK M&A activity fell by around 70% for both value and volume between H1 2008 and H1 2009, while European deal volumes fell by 54.4% by volume and 66.5% by value over the same period.

The drop in activity rates meant Linklaters was able to head the volume rankings with roles on only 72 deals in Europe and 31 deals in the UK, with the magic circle firm acting on 108 deals in Europe and 43 deals in the UK to top the same tables this time last year.

Meanwhile, of the largest deals with European targets during the first six months of the year, only 10 came in above $10bn (£6bn), with none breaking through $15bn (£9.1bn). Many of the deals were in the energy and utilities sector – with firms including Latham & Watkins, Clifford Chance (CC) and Uria Menendez winning roles on the period's biggest European deal – Enel's bid for a 25% stake in Endesa.

Commenting on the market, Alan Paul, a corporate partner at A&O, said: "There will be M&A restructuring work and it is looking like the resources sector is gearing up, what with Xstrata and Anglo American. Pharma has been good, energy is still being looked at and the smaller financial services work is still coming though."

With deal volumes shrinking, the rankings demonstrate the predictable 'flight to quality' seen during downturns. Only two of the top 10 European deals do not feature a magic circle firm advising in some capacity, with clients turning to their longstanding advisers. Slaughter and May, for example, once again benefitted from its relationship with HM Treasury to advise on the recapitalisations of the Royal Bank of Scotland and Lloyds Banking Group.

Despite the occasional bright spots, though, few are willing to call the bottom of the European deal market. Herbert Smith corporate head Michael Walter said: "It is going to be patchy for six months or so. A best guess from commentators, and one that I agree with, is that it will start to come back in either Q4 2009 or even Q1 2010."

CMS Cameron McKenna managing partner Duncan Weston added: "There is not a lot of M&A going on at the moment and we are looking at challenging times over the summer. There will be activity, but people will have to be alert to get it."

Even deals that are being announced are often falling down long before completion. CC, Linklaters and Simpson Thacher & Bartlett, for example, were among firms to win roles in Rio Tinto's attempt to increase its stake in Chinese aluminium producer Chinalco, but the deal collapsed owing to shareholder opposition.

Peter King, a corporate partner at Weil Gotshal & Manges in London, commented: "We really are experiencing a huge amount of volatility at the moment and the work that is there is the kind that can evaporate overnight."

Despite the difficulties, some partners are starting to feel more positive. CC corporate head Matthew Layton stressed that in recent weeks the firm had started to see signs of activity, with clients starting to feel optimistic.

Adrian Clark, head of corporate at Ashurst, said: "My experience of working through previous recessions is that once they have got to this stage they all end in the same way, no matter how they started. Prices of assets and shares go down and this proves attractive to potential buyers. Eventually the better credits are able to borrow to take advantage of the low prices and the M&A market starts all over again."