Business and environmental groups have expressed concern over reports that Defra is to cut almost £1bn from its budget over the next three years with a raft of business support services likely to be affected.

According to reports from The Guardian, Defra ministers will meet tomorrow to discuss the crisis after many of the department's various agencies failed to find sufficient savings to address a £300m budget shortfall from April. Despite cuts already being underway, the ministry reportedly still needs to identify more than £100m in further savings.

The shortfall is the result of the continuing fallout from computer problems that led to a major overspend of agricultural subsidies and the recent outbreak of animal diseases, including the foot and mouth, blue tongue and avian flu epidemics.

Both the Forestry Commission and the Environment Agency - which provides a raft of green advisory services to businesses and is responsible for enforcing many environmental regulations - are reported to be facing reduced budgets as a result of any new settlement. Meanwhile, the Waste and Resources Action Progamme, which promotes recycling and attempts to cut waste, yesterday issued 31 compulsory redundancy notices as it waits to find out if it is to face budget cuts of up to 30 per cent.

A spokeswoman for the organisation said that it had been told to plan for a budget cut of 25 per cent with a five per cent window either way. "As well as meeting the budget cut we are also putting together a new business plan to be published in the Spring," she explained. "We have reviewed which areas should take priority and as a result are planning to close some posts… However, we are also creating 18 new posts to help us deliver our objectives in the new business plan."

The spokeswoman would not be drawn on which services would be affected by the shift in the organisation's priority areas.

Various conservation agencies are also said to be in line for further cuts, while even bodies playing a flagship role in government attempts to cut carbon emissions such as the Carbon Trust and the Energy Savings Trust will be waiting nervously to see if they will face funding cuts.

Trewin Restorick, director of environmental charity Global Action Plan, said he expected Defra to confirm plans to cut its Environmental Action and Climate Change Challenge funds,. He predicted that such a move would affect a raft of smaller business advisory services from the non-governmental and charity sectors, including Global Action Plan.

A spokeswoman for Defra insisted no final decision on budget allocations has been reached, adding that "budgets for 2008/09 are currently being considered by Ministers with the aim of being finalised in early 2008". She said there was no set date on which the new settlement would be announced.

Business groups expressed disappointment at the news, arguing that such large scale cuts could only weaken government efforts to help businesses' improve their environmental performance.

"Many of the companies we work with would be surprised and somewhat disappointed by this news," said Craig Bennett of the Corporate Leaders Group on Climate Change, which represents many of the UK's biggest firms. "We've repeatedly told the government more funds are needed to help businesses understand climate change and develop low carbon strategies… not less."

Simon Briault, spokesman for the Federation of Small Businesses, said that smaller firms would be particularly badly hit by any cuts to Defra's services. "The way businesses are involved with CSR is very dependent on the information and incentives they get from government," he said. "This is particularly true for small businesses that don’t have the time and the money to undertake these initiatives alone and rely on advice and support from government. It is very worrying some of these services could be cut back."

Exactly which business services will be affected is difficult to predict due to the wide ranging nature of Defra's activities, Restorick argued, but he insisted there would be a measurable impact. "What I do know is that I have been invited to an awful lot of Defra leaving parties lately," he said.