UK M&A activity will fall by more than 60% in 2017 due to Brexit uncertainty, according to a new report by Baker McKenzie.

The firm forecasts that the aggregate value of UK M&A deals will slump from $340bn (£282bn) in 2016 to just $125bn (£104bn) this year, as investors wait for details to emerge about the country's new trading and financial relationship with Europe.

The joint report with Oxford Economics, published today (16 January), also predicts that US stock market volatility, concerns about China's economic slowdown and depressed commodities prices will damage investor confidence and see global M&A drop by more than 10% in 2017 to $2.5trn.

More positively, the report estimates that the total value of global initial public offerings will rise 28% this year, to $168bn, as businesses return to public markets and countries across Europe, the Middle East and Africa seek to raise money by listing state-owned companies.

M&A and IPO dealmaking will then both pick up strongly in 2018, "once greater clarity emerges" over Brexit and the new US administration's policies on trade and investment, the report adds.

Baker McKenzie has also produced an interactive tool that provides different forecasts depending on certain scenarios, such as the new US administration adopting more protectionist trade policies and proceeding with curbs on immigration, or the Chinese government easing its growth target.

The tool predicts that growing signs the UK is heading towards a "disorderly" Brexit would result in a significant decrease in transactional activity, for example. That scenario would cause the global M&A forecast to drop 20% in 2017, to $2trn, while the UK M&A forecast would fall almost a quarter, to just $94bn.

Baker McKenzie chair Paul Rawlinson admits that widespread political and economic uncertainty means predicting market conditions is "not an easy task", but says he is confident that overall transactional activity will increase significantly during 2017 and into 2018. "By nature, I am an optimist," he says.