Treasury aims to spread risk with new roster for credit crunch work

The Treasury and UK Financial Investments (UKFI) have asked City firms to tender for legal work related to the financial crisis - a relationship historically held by Slaughter and May.

City firms are being asked to submit their pitches to both the Treasury and the UKFI, a company set up last year by the Government to manage its stake in financial institutions which have received state aid.

It is understood that the Treasury is looking to appoint a panel of three firms to advise it on preserving the stability of the financial system, while the UKFI is set to name a ten-firm roster to handle its legal work.

The Treasury said the move has been made in an effort to mitigate the risks of any legal conflicts arising, and that it was in taxpayers' interest.

The news means that Slaughters, which has remained sole advisor to the Treasury throughout the financial crisis, could see its relationship with the Governmental body threatened.

Slaughters has advised the Treasury on a raft of instructions including the nationalisation of Northern Rock and the bailout of the UK's financial sector.

A Treasury spokesperson said: "It is clearly in the best interests of the taxpayer that in dealing with complex financial issues the Treasury acts upon the basis of high quality legal advice. During the financial crisis it became clear that from time to time issues may arise on which the Treasury needs advice from external legal advisers.

"Going forward and to mitigate the risks of a conflict of interest arising and provide value for money for the taxpayer, it is right that the Treasury has tendered to set up a panel system for legal advice. This will ensure that the Treasury gets the best legal advice in any given situation."

It is understood that magic circle rivals Allen & Overy, Clifford Chance, Linklaters and Freshfields Bruckhaus Deringer are all likely to pitch for the work.

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