Businesses have reacted angrily to the announcement of a major round of spending cuts at the Department for Environment, Food and Rural Affairs (Defra), which are likely to have a direct impact on many business support functions.

Budgets for low carbon energy projects and flood defences saw an increase in spending, but recycling, canals, wildlife conservation, forestry and a raft of community and small business-focused environmental initiatives all saw funding slashed.

The cuts come as part of an overhaul of the department's £3.94bn budget designed to tackle an anticipated overspend of around £1bn over the next three years. Office closures and around 1,400 voluntary redundancies are also expected as a result of the changes, which were necessitated by recent overspend arising from a failed computer project and responses to last summer's flooding and animal health crises.

Simon Briault of the Federation of Small Businesses predicted the cuts " would not go down well" with business leaders. "We expect business owners to be pretty annoyed that they are being asked to do more on the environment at the same time as the government is cutting down on some of its key environmental initiatives," he said.

His comments were echoed by Trewin Restorick, director of Global Action Plan, a charity providing practical environmental advice to businesses and public sector bodies which receives funding from Defra and has been directly affected by the cuts. "The government says the environment is a priority but when it comes to the hard decisions that is not being backed up by financial decisions, " he argued.

Businesses are most likely to be impacted by a scaling back of the government's waste and recycling advisory body WRAP, which only last month made 31 people redundant and is facing a 30 per cent cut in its funding from £59m to £43.2m.

A spokeswoman for WRAP said the cuts were "disappointing", but insisted they were in line with the organisation's expectations. She added that the agency would review its priority areas and provide further information on which services will be affected shortly.

Briault said that the cuts could prove a blow to businesses attempts to increase levels of recycling, adding that it was now unclear if planned business support initiatives would go ahead. "We had been talking with WRAP about a scheme to set up a database for small businesses showing them local recycling and waste collection points," he said. "It's a good idea but now we don't know if it will continue."

Restorick also argued that with the government having previously recognised the link between good waste management and reduced carbon emissions, the cuts at WRAP undermined Defra's claims that the funding changes would not jeopardise the government's climate change strategy.

Attempts to encourage businesses to cut supply chain emissions by transporting more goods using canals and waterways could also be undermined after British Waterways had its funding cut from £48.5m to £34.1m.

Defra attempted to put a positive spin on the new budget, outlining how it delivers greater spending on flood defences and a £30m increase in funding for clean energy technologies to over £400m over the next three years.

The department has also earmarked around £10m to fund up to four anaerobic digestion facilities designed to demonstrate the commercial viability of the waste to energy plants and has assigned £47.4m to the Carbon Trust, including an increase in funding for its energy saving loan scheme for small and medium sized businesses.