Rural communities must ensure they can play a role in the economy of the future or they face becoming "dormitories for the elderly".

That is the warning from the chairman of a group aimed at helping the Leicestershire countryside thrive.

Councillor Lesley Pendleton, from Leicestershire Rural Partnership, was speaking after a recent Government-commissioned report warned young people were being driven from rural areas by a lack of jobs and affordable housing.

The report calls for loosening of planning rules, better transport links and broadband access.

The partnership is this week launching a scheme which will see £400,000 ploughed into Leicestershire's rural businesses over the next three years.

The Inspire initiative will offer grants worth thousands of pounds to farmers, equestrian firms, landowners, small accommodation providers and tourist attractions in the countryside and in market towns.

Coun Pendleton, who is the county council's cabinet spokesman for rural affairs, said: "In these challenging times I can't stress how important it is to support Leicestershire's economy.

"I would like to encourage our rural businesses to take advantage of our new Inspire grants and I strongly urge people to get in touch with us to see if we can help."

She added: "The Leicestershire Rural Partnership has done and is doing what it can.

"We have promoted affordable housing schemes and have provided a scheme where young people can be loaned mopeds to get to work.

"But more must be done by districts to encourage industry to thrive."

She said firms such as BT could do more to provide better broadband links in rural areas.

"Individual communities must do more and think of the future or our villages could become dormitories for elderly people," she said.

The report led by the Government's rural advocate, Dr Stuart Burgess, gathered evidence from across England.

Dr Burgess said: "Wherever I go, I hear deep concerns – that challenges with housing, work, transport, training and social exclusion are preventing young people from living in the countryside.

"Without young people to provide a work force, rural economies are unable to fulfil their full potential and rural communities can go into a decline.

"On top of this, lack of broadband and mobile phone coverage in many rural areas is hitting young people and businesses alike."

The report highlights that social housing only accounts for 13% of stock in rural areas, compared to 22% in big towns and cities.

Demand for new housing in the countryside is expected to grow by 35% between 2006 and 2031, compared to 27% in urban locations.

While 60% of urban areas have access to high-speed cable-based broadband, the figure for villages and hamlets is just 1.5%.

The study calls for local authorities to be "more creative and flexible" on planning issues and says more employment guidance and apprenticeships are needed.

Campaign group the Country Land and Business Association, in Market Harborough, said it welcomed the report.

A spokesman said: "A lack of economic infrastructure leads to a scarcity of jobs, which in turn drives people out of the countryside in a spiral of decline for rural areas, their communities and businesses."

For details on Inspire grants, visit the website:

www.oakleaves.org.uk/inspire-leicestershire