THE rural economy faces a battle to avoid slipping again into recession, says a report.

Rising unemployment, shrinking profits and plummeting confidence in countryside businesses has thrown the rural economy to the brink of a further recession, it warns

Data from the Rural Economy Index for the 2013 first quarter shows that both agricultural and non-agricultural rural businesses are suffering.

All eight survey indicators fell across both types of business, according to the study by the Country Land and Business Association and Smiths Gore.

Agricultural businesses are faring worst. The optimism felt in 2012 has gone, due to bad weather, poor harvests and the rising price of livestock feed.

The index measure of optimism has fallen by 40% compared with the same quarter last year.

Sales have fallen in the past six months with orders, sales and profits expected to be lower in the next 12 months. Farming businesses also anticipate employing fewer people.

Non-agricultural businesses are less optimistic.

But they still expect higher profits in the next year despite actual sales shrinking over the past six months and the number of business enquiries falling, the report warns.

Hopes for higher employment also faded with fewer non-farming businesses expecting to employ more people in the next year, it adds.

CLA President Harry Cotterell said the index was particuarly bad news came at a time when the government's priority was growth.

The government should reduce the negative impacts of over regulation, put in place an effective broadband infrastructure and encourage rural businesses to fully embrace growth principles.

Dr Jason Beedell head of research at Smiths Gore said: "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."

Details of the latest rural economy index can be see here.