Rising unemployment, shrinking profits and plummeting confidence in countryside businesses have combined to push the rural economy to the brink of a further recession, according to a new survey by the Country Land and Business Association and Smiths Gore.

Data from the Rural Economy Index for the first quarter of 2013 show that both agricultural and non-agricultural rural businesses are suffering, though the agriculture sector is reportedly faring worst, as 18 months of challenging weather has taken its toll on confidence.

Although CLA said all eight survey indicators fell across both types of business, optimism reported in the agriculture sector in 2012 has dissipated due to poor harvests, bad weather and rising input costs. The Index's measure of optimism fell by 40 percent compared with the same quarter last year.

The survey revealed sales have fallen in the past six months, and orders, sales and profits are all expected to be lower over the next 12 months. Farming businesses also anticipate employing fewer people compared to the third quarter of 2012, when the last survey took place.

This pattern is repeated across non-farming businesses, although these enterprises still expect higher profits in the next year, according to CLA. Hopes for higher employment also faded in non-farm businesses; few respondents in this sector expect to employ more people in the next year.

Although optimism was low in the farming sector last December, when the results of the last Rural Economy Index were published, optimism had been higher in non-faming businesses. This shrank in the first quarter this year, according to the two groups.  

In response to the findings, which, CLA suggests, shows that the effects of recession could be compounded in rural areas, the Association's president urged the government to act to support the rural economy. Harry Cotterell said, "This comes at a time when the Government's priority is growth." He called on the Government to cut business regulations, which he believes are hampering rural enterprises, and "put in place a broadband infrastructure that is effective, affordable and available to all."

However, it would appear that the impacts of recession on the countryside are not limited to businesses. Cross party MPs have suggested that rural councils and communities are bearing the brunt of savage government cuts. In February, a debate in the House of Commons, organised by the Rural Fair Share initiative, drew attention to the effects austerity measures are having in rural communities. Whilst the CLA has called for widespread deregulation to 'stimulate growth' in rural regions, MPs called on government to tackle growing concerns over rural neglect in allocation of public spending.

The group's Chair Graham Stuart, MP for Beverly, said funding cuts are disproportionately affecting those living in the countryside; he claimed urban councils already receive 50 percent more per head than rural areas despite evidence that many services are more expensive to deliver in sparsely-populated areas. Mr Stuart pointed out, "People in rural areas earn less, pay higher council tax and then receive substantially less support for services."

Following the debate, local government minister Brandon Lewis pledged to heed the MPs' calls. He said, "Because we are listening, we are going to do more to support rural areas and manage the extra costs of delivering services in those areas."

However, Dr Jason Beedell head of research at Smiths Gore said on Monday, "The Rural Economy Index clearly shows that the rural economy is continuing to suffer. For farming, bad weather, poor harvests and the rising costs of livestock feed have all played a part, which we largely expected.

"More shocking is the fall in expected profitability for non-agricultural businesses over the next 12 months. The rural economy has stalled and further recession is possible."

Results from the CLA/ Smiths Gore survey are available in more detail here