CONFIDENCE is growing in the rural business sector, suggesting the countryside is starting to emerge from the recession.

Optimism for non-agricultural rural businesses is up with sales, profits, investment and employment expected to be higher in 2013, according to the latest Rural Economy Index (REI).

The REI is produced by the Country Land and Business Association in partnership with rural business experts Smiths Gore.

CLA President Harry Cotterell said: "The outlook from the latest REI is positive for non-agricultural businesses.

"However, 55% of rural businesses that use lending report that borrowing rates have worsened, which of course could slow their economic recovery.

"In contrast, confidence and sales in the agricultural sector are significantly down on the start of this year due to adverse weather conditions."

Rupert Clark of Smiths Gore said: "There has been a shift in the market with a fall in sales and profitability for many farming businesses because dreadful weather during 2012 affected the harvest and caused difficulties for next year's crops.

"If the weather in 2013 improves, we expect to see an increase in agricultural confidence as the underlying market fundamentals, of price and demand, are strong."

Some 45% of rural businesses outside agriculture in the third quarter of 2012 reported higher sales over the past six months – up from 31%  in the previous quarter.

And 56% reported higher business optimism for the next 12 months – up from just 20% in the previous quarter.

Finally, 48% predicted higher profitability over the next 12 months – up from 26% in the previous quarter.

Despite the rural economy showing signs of recovery, the impact of this year's bad weather on agriculture was plain to see.

Some 47% of agricultural business predicted a drop in profitability over the next 12 months – up from 28% in the previous quarter.

Meanwhile, 21% reported lower sales over the past six months – up from 12% in the previous quarter.

At the same time, 31% expected to make a lower investment in their business over the next 12 months – up from 20% in the previous quarter.

The index results can be downloaded by clicking here.