Staff were informed of the decision, which could see 12 people made redundant in its Manchester office and a further 19 lose their jobs in the company’s London base, last Thursday.
A total of 150 people are currently employed across the division.
Wates, a top 15 contractor, is putting the notified staff through “a consultation process” which is expected to last several weeks.
The workers should hear the firm's decision by the end of November.
Sources say competitors are delighted by news of the cuts, which have been described by some as a “significant” loss for the division.
A Wates spokeswoman said: “Due to the current market conditions Wates Interiors along with a number of our competitors are positioning ourselves to face the challenges ahead.”
Despite the cuts, she denied the Wates Manchester office would close down.
If all 12 staff lose their jobs, only eight will remain in the firm’s northern office.
The spokeswoman also refused to specify which staff were at risk of redundancy, but said the cuts were isolated to the interiors arm and would not affect any workers in Wates’ other divisions.
According to the group’s 2007 annual report, released earlier this year, Wates Interiors sustained a 21 per cent increase in revenues last year driven by “a strong flow of repeat business and new customers across the UK”.
The division enjoyed a turnover of £92 million, accounting for one-tenth of Wates' £943 million turnover.
In its statement on the outlook for 2008 the firm said: “Some downturn is evident in the London property market but our growing reputation for delivery in Manchester, Liverpool and Leeds will reduce the effect of any economic slowdown in the capital.
“With the strongest forward order book in our history, we are cautiously optimistic that we will continue to deliver through economic uncertainty and increased competition.”
But the majority of Wates Interiors clients are from the financial sector and include KPMG, PricewaterhouseCoopers, Deutsche Bank, Sumitomo, Royal Bank of Canada, Zurich Financial Services, Barclays Capital and Royal Bank of Canada.
Rival Styles & Wood, which axed 45 of its 300 staff over the summer, said it had not made any further redundancies and had no plans to over the period ahead.
The fit-out firm released its interim management statement to the stock exchange last week.
It revealed: “Management's assessment is that group profit before taxation for the current year is likely to be around break even, largely as a result of a shortfall in margin relating to certain projects substantially completed by 31 December 2007."
Chief executive Ivan McKeever – who refused to reveal which schemes had caused the hassle – said that with their exception, the group was trading in line with expectations.