One of America’s most profitable law firms is axing 35 jobs in the first major cutback to hit the traditionally safe profession following last summer’s credit crunch.

Cadwalader, Wickersham & Taft said it would cull 35 lawyers — equal to just under 5 per cent of its total legal staff — because of “unexpected and persistent volatility” in the financial markets.

A further 20 lawyers have been moved from weaker practice areas to those less affected by recent market events.

Cadwalader said the changes would affect its US offices only, leaving its 67-lawyer London team unscathed.

Cadwalader’s average profits per partner, a measure of law firm performance, hit $2.9 million (£1.5 million) last year, making it the fourth most profitable in the US, according to The American Lawyer.

Despite a significant drop in capital markets and mergers and acquisitions activity in the closing months of 2007, law firms have so far largely avoided the kind of mass redundancies that have hit some of their banking clients.

Clifford Chance, the world’s largest law firm by revenues, axed six lawyers from a New York-based specialist fixed income team in November, calling the move a “direct response” to deteriorating market conditions.

Despite the low numbers of lawyers affected, the move sparked global interest because group redundancies at law firms are so rare. Large law firms aggressively promote job security as a means of attracting and retaining talented staff who may otherwise be tempted to take more lucrative but less secure positions in investment banks.

However, some have predicted that Cadwalader's move will will be imitated elsewhere.

"I think a lot of firms have been waiting for one of the big boys to shed associates so they can have cover to do the same," Arthur Schwartz, a recruiter at Klein Landau in New York, told The Wall Street Journal.

Tony WIlliams, principal of Jomati, a law firm consultancy, said UK firms could also be forced to cut numbers.

"I expect most staff cuts will be done through natural wastage and 'counselling out' at review time rather than formal redundancy programmes.

"However, higher associate salaries mean that firms will be less able or willing to carry unproductive staff than in previous downturns. With the number of property and private equity deals down by 75 per cent in the last quarter of 2007, unless matters do turn for the better soon it is conceivable that natural wastage may be insufficient by March."

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