Application fees for claims management companies will rise 43% under new measures announced by the government today.

The claims management regulation unit, run by the Ministry of Justice, said fees will increase from £1,400 to £2,000 from April.

The percentages of annual turnover levied above the threshold of £89,889 will increase to 0.9% of annual turnover over £1m, 0.8% of annual turnover up to £5m and 0.75% of annual turnover over £5m.

The MoJ held a consultation on the fee increases at the end of last year and has indicated the new rates will cover operating costs expected to be £5m in 2015/16.

The reason for increased charges is that the number of CMCs in operation has fallen sharply, leaving fewer firms to fund the unit.

The MoJ said numerous consultation responses argued that charging surviving CMCs more was unfair, but the regulator said the costs of looking after the sector remain the same.

The department’s response added: ‘Because detriment caused to consumers and others affected by claims management activities has always been attributed to a small number of companies whose actions have a disproportionate effect, regulatory costs over 2015/16 are not forecast to reduce given there has been no corresponding reduction in the number of regulatory interventions carried out.’

A total of 41 responses to the consultation paper were received. Of these, 35 were from authorised CMCs; two were from affected financial service providers and four from members of the Claims Management Regulatory Consultative Group.

Claims manager First4Lawyers, one of the biggest companies in the sector, said it was ‘somewhat disappointed’ with a real-terms increase of 130% in annual fees to cover the regulator and the move of complaints-handling to the Legal Ombudsman.

Spokesman Andrew Cullwick added: ‘We hope that these increases and the introduction of a dedicated complaints-handling service will deliver some positive change to the sector eradicating those firms that flout the regulations and participate in unacceptable marketing activities.’