Rural campaigners have urged the Government to halt an urban bias that is punishing businesses in the countryside.

In a report, the Commission for Rural Communities (CRC) says it has encountered "too many examples" of entrepreneurs struggling to get secure public cash and overcome the red tape burden.

In a thinly veiled attack on Labour, it says that Government policy is "too often designed around majority – urban – characteristics and needs.

"This needs to change".

Last week, former Prime Minister Tony Blair conceded that he struggled to understand the way rural England worked.

The CRC call is part of the Agenda for Change report delivered to the coalition about the best way to "release the economic potential of England's rural areas" against a backdrop of public spending cuts.

It follows about 18 months of discussions with rural businesses about the issues holding the countryside back.

The report found that problems associated with the "lack" of high-speed broadband and mobile communication coverage was "one of the strongest messages we heard from rural businesses".

The CRC – which is to be replaced by the Rural Communities Policy Unit as the key countryside adviser to the Government – added the "burdens of red tape and bureaucracy" are more acute for small rural businesses as public bodies are often "distant from and unfamiliar with rural communities and businesses".

It criticised local authority action plans for being "weak" in terms of reflecting the opinions of rural firms, which was indicative of a "wider disconnect" between business and local government in some areas.

Planning decisions also continue to "frustrate" businesses, the report says. It says: "Some successful rural firms have been 'advised' that their expansion is inappropriate or unacceptable in rural locations.

"This can result in a loss of jobs, investment and opportunities. Yet other firms with similar activities have been enabled to develop in premises and places of similar character."

Stuart Burgess, chairman of the Commission for Rural Communities, said: "More of the potential of our local rural economies can and should be realised.

"Following this Government's emergency Budget it is clearer than ever that helping the release of this potential must be a big part of the next stage of our national economic growth."

The CRC welcomed the coalition Government's commitment to roll-out superfast broadband "in remote areas at the same time as in more populated areas".

It has also praised the advent of Local Enterprise Partnerships to replace regional development agencies.