Linklaters, the world's second-largest law firm, is poised to cut up to 270 jobs because of an unexpectedly sharp fall in revenue caused by the financial crisis.

The “magic circle” firm will lose up to 120 associates, or almost 18 per cent of its junior fee-earners in London. As many as 150 support staff could also lose their jobs, the firm said on Thursday. Linklaters declined to say whether there would be further job losses in its overseas offices.

The redundancies do not include trainee solicitors or partners, although The Times understands that as many as 55 partners will also leave as a result of the restructuring, referred to internally as “Linklaters' New World”.

Thursday's cuts are the largest announced by a UK law firm since the credit crunch began, exceeding the 80 announced by Clifford Chance, the world's biggest law firm, this month.

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Simon Davies, managing partner, said that Linklaters was left with no choice after a steep fall in demand. He declined to comment on the firm's financial position but said that demand was likely to fall even further this year. “We've seen huge changes in the financial markets and a number of our clients are suffering greatly,” Mr Davies said. “Given the reduction in the amount of work overall it is absolutely vital that we respond. This is not a decision that we have taken lightly.”

Mr Davies said the firm could not rule out further redundancies: “I can't provide a definitive answer to that given the uncertainty in the market.”

Junior lawyers reacted angrily to the news. Many were anxious about their future and blamed management for its handling of the situation.

Plans of the impending cuts were leaked to The Lawyer, a trade magazine, on Friday before they had been announced internally. According to a source within the firm, worried lawyers trying to read the report found that they had difficulty accessing the magazine's website. That led to speculation that Linklaters had blocked access to the website — an allegation the firm denied. A spokeswoman said that any blockage was most likely the result of high internet traffic.

Although the number of job losses is smaller than those being announced in other sectors, such as investment banking, the size of the shake-up is unprecedented for a leading UK law firm, surpassing the £40 million restructuring undertaken by Freshfields Bruckhaus Deringer, its magic circle rival, two years ago.

It prompted widespread speculation that Linklaters was slimming in preparation for a merger with a top Wall Street firm in an attempt to create the first truly global “super firm”. Mr Davies did not rule out the possibility of a merger, but said that Thursday's redundancy announcements were not connected. “We are approached from time to time [by potential merger partners] and do consider those approaches carefully but I have no further comment to make,” he said.

One of the world's most powerful law firms, Linklaters has about 540 partners and 2,400 salaried lawyers. Its revenue of £1.29 billion last year was second only to Clifford Chance, which billed £1.3 billion. It is the City's second most profitable firm after Slaughter and May: last year equity partners were paid an average of £1.4 million, with the top partner taking home £3.4 million, according to published accounts.

However, the firm has suffered as a result of the downturn in the financial markets. Although it secured a key role on the administration of Lehman Brothers, to which it has committed more than 100 lawyers, it suffered a blow with the collapse of the BHP Billiton-Rio Tinto merger.

More than 2,500 lawyers have lost their jobs at big UK law firms since the credit crunch began. This month has been particularly bad, with 300 losing their jobs. In contrast to previous recessions, partners — once regarded as secure for life — have been targeted. According to research published this week by Legal Week, 97 per cent of partners at City firms expect senior ranks to be purged this year.

alex.spence@thetimes.co.uk

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