Four-fifths of people directly employed in personal injury claims face losing their jobs if government reform proposals come into law.

A report from research consultancy Capital Economics concludes that 80% of the 44,000 people involved in the sector – including lawyers, insurers, claims management companies and medical reporting agencies – will be put out of work if reforms go ahead.

The government has now finished consulting on raising the small claims limit for all personal injury claims to £5,000.

Insurance companies say they will pass on any savings made – estimated at £40 per motorist – through cheaper premiums.

Campaign group Access to Justice (A2J), which commissioned the report, says the the findings are proof that the government’s argument does not stand up.

In addition to the jobs directly affected, the economists estimate the personal injury sector adds £2.1bn value to the UK economy through the spending of firms and employees.

Capital Economics’ Mark Pragnell, lead author, said: ‘When considering not only the lawyers but all the other jobs that are supported by this work, we estimate that up to 77,000 jobs are at risk – many in locations where alternative jobs of similar value will be difficult to find.’

Pragnell explained the research was based on government statistics and a survey of more than 160 law firms, including some of the biggest names in the market.

Firms involved in personal injury spend £1.85bn annually on suppliers, supporting 26,000 jobs.

The north-west, where 9,000 jobs are at risk, would be the area likely to suffer the most, followed by the south-east (6,000 jobs) and the Humber (4,000 jobs).

Martin Coyne, chairman of A2J, pointed out the government moved quickly to save 10,000 jobs at risk in the steel industry, in contrast to these reforms, which seemed ‘hell-bent on shutting down an entire industry’. In the impact assessment accompanying the consultation, the Ministry of Justice said those affected by the changes ‘are assumed to find alternative activities of equal economic value’.

Coyne said: ‘We believe the economic analysis makes a compelling case for ministers to re-assess the reforms and the significant negative cost impact, against an uncertain consumer benefit.

‘We all agree it’s necessary to reduce fraudulent and frivolous claims, and get rid of cold calling, but not at the expense of tens of thousands of jobs and for the sole benefit of insurance companies.

‘There are better ways to maintain the historic and important rights of injured people to receive redress yet also tackle fraudsters who try and game the system.’

The government is expected to respond to the consultation in April. Most changes proposed, including a cap on damages for soft-tissue injuries and a ban on pre-medical offers, would require primary legislation. However the small claims limit threshold could be increased almost overnight through a statutory instrument amending the Civil Procedure Rules.