Tumbling fees, dwindling workloads and payment periods stretching beyond the horizon. In the last recession this led to a frenzy of mergers and acquisitions. This time, it's different.

According to a report by researcher Corpfin, corporate activity in the first quarter of this year has ground to a virtual halt. There were £258m of deals in the construction sector in the first quarter, compared with £7.2bn a couple of years ago.But why should this be the case? And when can we expect the stagnation to end?

There are a number of reasons. The most obvious is that the bank finance isn't there to get the game going. Then there's the stock market, which has been so chaotic that companies are scared of making any decisions that have the potential to send their share prices into a tailspin.

There is also an issue with pension deficits - not easy to deal with at the best of times, but market volatility makes them particularly dangerous now. Due diligence was hard enough in the boom, as Carillion can testify. In a recession like this one, it's a nightmare.

In the contracting sphere, we've already seen big mergers in the past two years, and the top five have pulled away from the rest in terms of size and order books. But no more big deals are in the offing for them, and when buyers do come back, consolidation is likely to be popular with companies in the £100-500m bracket.

The driver here will be the need to provide national coverage in order to get on frameworks, and appeal to clients who find it easier to trust large firms with a good brand, or the small and specialised.

For consultants, though, mergers are likely to begin sooner, perhaps towards the end of the year. By then the stock market will have settled down and it will become clearer how their targets have fared in the recession: given how much the world has changed, 2008 results don't count for much now. Activity will be driven by the need to pick up expertise and niche players, particularly those in renewables, nuclear and transport.

And as we reported a couple of weeks ago, we are facing a continuing influx of American multinationals keen to broaden their global reach. These outfits are flush with cash thanks to president Obama's largesse towards infrastructure, and therefore their share prices.

What's clear is that we have too many firms chasing a diminishing pot and fewer places in the world to run to, compared with last time. Something has to give and it will probably be those sellers who are struggling, but still asking unrealistic prices - those who are living in cloud-cuckoo-land, as Clive Sayer of Baqus puts it. If they don't, they risk losing more than the chance to cash in their chips.