Clifford Chance, the world’s biggest law firm, is to reduce the size of its partnership as the effects of the downturn penetrate further into the City’s “magic circle”.

The firm is to conduct a review of partner numbers in all departments globally, it told staff yesterday. It would not say how many partners would lose their jobs.

The news came less than a week after Linklaters, one of its closest rivals, announced an overhaul that could result in dozens of partners leaving with up to 120 salaried lawyers, almost 18 per cent of its London associates.

Clifford Chance, which has about 650 partners and 3,300 salaried lawyers, has already cut up to 80 junior fee-earners from its London office in response to the financial upheaval. Last month it was revealed that the firm asked equity partners to inject more than £40 million – an average of more than £100,000 each – to boost its working capital. Jeremy Sandelson, its London managing partner, said that the move was a routine measure to ensure a strong balance sheet and had been planned since last spring.

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David Childs, global managing partner, said yesterday that Clifford Chance had no choice but to extend the cuts to senior ranks. “It is essential to reshape the firm,” he said.

Mr Childs said that the review, expected to be completed by the April 30 financial year-end, would be based on the firm’s long-term projections for each practice area.

The growth of leveraged finance and complicated financial products in recent years propelled Clifford Chance to record revenue levels – its fee income last year hit £1.33 billion – but its reliance on banks left it vulnerable to the credit crunch.

Mr Childs said that leveraged finance was unlikely to return to the levels seen in the past few years, which could hurt profits at the biggest law firms. However, he was hopeful that other areas that have been quiet since the start of the crisis, such as private equity and M&A, would pick up.

Clifford Chance was still busy in some areas, Mr Childs said, advising Barclays, on its acquisition of parts of Lehman Brothers, and InBev, the brewing giant, on its takeover of Anheuser-Busch. “We’re not seeing a catastrophic fall in revenue,” he said. “I don’t believe . . . that we’re experiencing a paradigm shift in the business of law.”

alex.spence@thetimes.co.uk

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