European mergers and acquisitions have suffered their worst start to the year in a decade, denting hopes of a strong recovery in corporate activity in 2005. However, equity capital markets in Europe have enjoyed their best annual start and debt markets have experienced the healthiest January in five years.

A total of just €15.5bn ($20bn) worth of M&A deals has been announced this month, according to data provider Thomson Financial. If no big deals are announced today, activity will be at its lowest level since 1994. The 488 deals announced in the first month was the lowest number for 15 years.