Work experience schemes are under threat as the compensation culture drives up insurance premiums for businesses.
Costs for some organisations have risen by 100 per cent even though, nationally, only a handful of compensation claims are made every year.
Small and medium-sized businesses, the main providers of work experience, are being hardest hit.
And the charity Trident Trust, which places half a million youngsters a year on work placements, has seen its premiums double.
Insurance groups cite increased litigation and a rise in the compensation culture as the main reason for the hike in prices.
John Dunford, general secretary of the Secondary Heads Association, said:
"Next year we will see the introduction of a compulsory work-related element at key stage 4 and schools will be relying on businesses to help them out with work placements," he said.
"If employers withdraw it will make it impossible for schools to fulfil that obligation."
Paul Poulter, Trident's chief executive, said: "If students and employers are briefed, and an adequate health and safety visit is carried out, accident risks are small. In three years we've placed nearly 500,000 students and had only a handful of incidents requiring hospital treatment.
"Two involved animals, and one a fall from a stepladder. In two cases no liability was proved, while in the other, parents accepted it was an accident."
A spokesman for the Association of British Insurers said that last year companies lost pound;760 million on compensation payouts.
"The average claim rises 15 per cent each year and the cost of all claims has risen 300 per cent in five years," he said.
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