The lackluster figures come amid growing global appetite for M&A activity, with a 7 percent increase in worldwide deals expected in the second quarter of this year, according to Intralinks.
"Uncertainty around the government's exit strategy with the EU is likely to have a chilling impact on inward investment and M&A activity over the two-year negotiation period," said Philip Whitchelo, vice-president of product strategy and marketing at Intralinks.
"This is being reflected in declining early-stage M&A activity, already unable to maintain the momentum that saw a 7 percent post-Brexit-vote jump in Q3 2016."
Previously the U.K. has been Europe's strongest M&A market. However, early-stage M&A activity was up 9 percent across the rest of Europe, the Middle East and Africa in the last three months of 2016, with France up 28 percent, Spain 24 percent higher, Germany up 17 percent and Italy at 15 percent higher, the strongest performers.
Within this, the industries set to see the most deals are in the consumer and retail; technology, media and telecoms; and energy and power sectors.
Despite the strong global figures, the U.S. is also set to see a fall in deals in the fourth quarter of 2017, with Intralinks estimating a 5 percent drop.
The biggest losers within this are predicted to be the consumer and retail; industrials; and energy and power industries. The materials, financials and healthcare sectors will, however, show increasing announcements in second quarter of this year, the research suggests.
Elsewhere, developing economies are set for a large uptick in deals, with early-stage transactions up 44 percent in Asia Pacific and 11 percent in LATAM.