The economic meltdown is set to claim its biggest casualty yet in the legal sector, with Halliwells hovering on the brink of administration.

Talks are under way today to transfer the bulk of the top 50 firm’s assets to Liverpool-based Hill Dickinson, though there is no guarantee these will succeed.

Other firms interested in acquiring parts of Spinningfields, Manchester-headquartered Halliwells are in contact with the firm, with Barlow Lyde & Gilbert reported to be interested in the Manchester-based insurance practice.

Halliwells employs some 700 fee-earners, including about 114 partners, at offices in Manchester, Liverpool, Sheffield and London. The firm reported a slight fall in income to £83m in 2009, with profit per equity partner down 47% on the previous year at £226,000.

Halliwells applied last week for court approval to appoint an administrator, triggering a moratorium on its liabilities and providing a window for talks on the future of the business. The firm is expected to be dissolved when these talks have concluded.

A spokesman for the Solicitors Regulation Authority said the regulator is in daily contact with the firm. The regulator is making preparations to intervene in all or part of the business, depending on the outcome of negotiations with potential acquirers.

Halliwells' predicament has been blamed on high property costs exacerbated by the economic climate, which has hit profitability. The firm spent millions of pounds relocating to the Spinningfields site in 2007.

Shay Bannon, head of business restructuring at BDO, which is advising Halliwells, said: ‘It is well known that the firm assumed substantial property obligations in recent years which have significantly increased operating costs. This, together with the slowdown in transactional activity in the current economic climate, has put pressure on cashflow.

‘Halliwells has a great reputation and a highly skilled and committed workforce. We are in discussions with several other law firms regarding a sale of the Halliwells business. The moratorium is in place while we work with Halliwells to conclude the sale of the business.’

Significant job losses appear inevitable regardless of the outcome of negotiations, with junior lawyers and support staff likely to be most at risk.

Halliwells' latest accounts, filed in February 2010, show that the firm ended the 2009 financial year with an £18m bank loan due to be repaid to Royal Bank of Scotland in 2011. The firm later renegotiated its banking facilities with RBS to include a £2m overdraft renewable in January 2011, a £5m term loan repayable by April 2013 and a revolving credit facility repayable in April 2013.