LOWER investment in rural business over the next 12 months could lead to restricted growth, say analysts.

The Rural Economy Index examined more than 100 businesses in the countryside during the first quarter of 2012 to provide a snapshot of rural economic life for the agricultural and non-agricultural sectors.

It was conducted by the Country Land and Business Association with Smiths Gore.

The survey found that business confidence is increasing, with over 85% reporting the same or higher sales in all sectors.

But lower levels of investment in a fragile rural economy remain a worrying factor for more than a quarter of business types.

Rural businesses, such as property and tourism enterprises, reported higher confidence with almost one third feeling more optimistic than last year and 15% expecting to increase employment.

Agricultural businesses surveyed said that employment will remain stable, with 79% looking to maintain job numbers at the current level. Forty one percent reported stable profits, with 34% anticipating higher profit margins.

CLA South East regional director Rupert Ashby said: "Rural areas were last to enter the recession and there are no significant signs of recovery yet. Confidence is returning, but it is slow in this fragile trading environment."

Mr Ashby added: "A lack of investment over the next 12 months could have a detrimental impact on business growth and the potential to diversify.

"The results from the Index highlight the need for the Government to implement its growth strategy as soon as possible."

Jason Beedell, head of research at Smiths Gore, said: "The Index shows that a significant proportion of rural businesses are still experiencing challenging trading conditions with only about a third of businesses expecting a better year than last year.

"Local and national government can take action to make doing business easier – such as the recent pro-development National Planning Policy Framework and reducing red tape.

"But we would like to see more action, especially from local government."