Linklaters, the world's second-largest law firm, is set to cut up to 120 junior lawyers in its London office in response to a sharp fall in demand for commercial legal services.

The shake-up at the "magic circle" firm could also see up to 150 redundancies among support staff, Linklaters announced today. Trainee solicitors will not be affected.

The Times understands that a number of partners will also be asked to leave the firm as part of the restructuring, altough the firm declined to comment on partner departures.

Simon Davies, the managing partner, said the firm had been forced into the shake-up by the global economic situation.

"We are acting now to reduce our headcount in order to meet anticipated demand," Mr Davies said. "It is vital that the firm is in the best shape to meet the challenges which lie ahead."

News of the overhaul - the biggest yet undertaken by a UK law firm in response to the financial crisis - emerged late last week.

One of the City's most powerful law firms, Linklaters has grown rapidly in recent years to 540 partners and around 2,400 lawyers. Last year it earned fee income of £1.29 billion, only narrowly behind Clifford Chance, which had revenue of £1.33 billion.

Yet its performance had been the subject of rumours in recent weeks despite securing a prize role on the administration of Lehman Brothers.

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