Reed Smith, the transatlantic law firm, has launched a cost-cutting programme that will put 130 jobs at risk across its US and UK offices.

In the latest sign that the legal industry is suffering from the economic downturn, the firm said that 115 support staff would be made redundant in the US in marketing, human resources, information technology and other areas.

It has also started redundancy talks with seven support staff and 11 lawyers in its London office, Gregory Jordan, the managing partner, said in a memo to staff yesterday.

The memo said that cuts to the number of lawyers in London would be made because of "overcapacity" in its corporate and finance practices.

Mr Jordan said the firm regretted the move but that it was an essential reaction to expectations of weaker demand for legal services next year.

News of the cuts follows yesterday’s announcement that Travers Smith, a London law firm, was cutting five associates from its real estate and corporate practices. Earlier this week, DLA Piper announced a redundancy consultation that could see up to 40 jobs cut split equally between legal and support positions.

The economic slump has claimed around 1,000 legal jobs from a number of leading UK firms, with further cuts expected.

Tony Williams, a law firm consultant at Jomati, said the outlook for smaller firms was particularly gloomy with staple practice areas such as commercial property or M&A showing “barely a flicker” of activity.

Those firms could find themselves fighting for survival in the next few months, with increasing premiums for professional indemnity insurance, banks tightening credit lines and clients attempting to delay bills and to reduce fees.

According to a survey released today by Deloitte, the consultancy, revenue growth at the top 100 law firms has slowed for the second consecutive quarter.

Fee income at the UK’s top 100 law firms increased by 5.8 per cent in the quarter ended October 31, the lowest quarterly increase since Deloitte began tracking the sector.

Jeremy Black, associate partner in Deloitte’s professional practices group, said: “We are now seeing signs of the economic downturn affecting activity levels in the legal industry.

"There is also a growing disparity in performance. Whilst some firms are continuing to perform, others are suffering a significant hit on their revenue growth due to the slowdown.”

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