Linklaters, the world’s second-largest law firm, will lose up to 50 partners in the biggest shake-up in the legal services market in decades.

It is a second blow to the Magic Circle, coming two weeks after Clifford Chance, the world’s largest law firm, revealed it had asked partners to inject more than £40 million in fresh capital.

Yesterday Linklaters told The Times that the crisis in the financial markets and wider economy had forced the review. “This is vital as part of the sound management of the firm,” Simon Davies, managing partner, said.

“What affects our clients affects us too.” He said the firm would announce the details of the overhaul on Thursday. “We will be as transparent as possible and we are committed to limiting uncertainty,” he said.

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News of the shake-up leaked yesterday before it had been announced to staff. According to The Lawyer, a trade magazine, the partner cuts are likely to hit offices in Western Europe particularly hard, although as many as a dozen partners in London could also be asked to leave.

The overhaul could also see 10 per cent of the firm’s junior salaried lawyers – as many as 200 worldwide – lose their jobs, the magazine reported.

Linklaters, one of the City’s most powerful law firms, has grown rapidly in recent years to 540 partners and about 2,400 lawyers. It earned fee income of £1.29 billion last year, up 22 per cent, only narrowly behind Clifford Chance, which had revenue of £1.33 billion. Yet Linklaters’ performance had been the subject of rumours in recent weeks despite securing a prize role on the administration of Lehman Brothers.

News of the shake-up came at the end of a miserable week for the UK’s top commercial law firms.

On Tuesday, Addleshaw Goddard, a national firm with revenue last year of £195 million, was the first to admit it was downsizing its partnership in response to the credit crunch. It will cut 19 of 182 partners in coming months.

On Thursday, SJ Berwin, a City firm, announced it was in redundancy talks with 20 lawyers and 20 support staff. It also closed its highly regarded film financing division, resulting in the departure of four partners.

Baker & McKenzie, the world’s eighth-largest firm with more than 3,300 lawyers, yesterday said that it would cut 20 junior lawyers in London.

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