Business leaders in Birmingham and Solihull warned today that a slight improvement detected in the local economy over the past three months will be difficult to sustain in the next quarter.

New figures from Birmingham Chamber of Commerce and Industry (BCI) revealed that UK and overseas sales increased for manufacturers in the first quarterly economic survey of 2010.

But with all businesses facing serious pressures and fiscal tightening expected after the general election, there was uncertainty that the upward trend could be sustained.

Paul Bassi, the BCI's president, said: "The encouraging start to 2010 is welcome but with tough new fiscal measures expected to be introduced after the election we're not out of the woods yet.

"We shall be looking for business-friendly measures, including the scrapping of the planned increase in National Insurance contributions because we firmly believe that it is the private sector that is going to lead the UK out of recession.

"This is underlined by the confidence expressed by all sectors that their profitability would improve over the next quarter. There seems to be a determination to outride any adverse fiscal measures that might be introduced."

In the first quarter, companies have reported that higher demand from export markets wasn't just on the back of the softer sterling but also improving global market conditions. 

In manufacturing, a percentage balance of +15 per cent firms, the highest figure recorded since the final quarter of 2007, reported an increase in domestic sales over the past three months. 

In Quarter 4 2009 this figure stood at -7 per cent. Services witnessed a smaller increase. 

Business confidence in both manufacturing and services improved. Seventy-two per cent of manufacturing firms were confident that their profitability would improve over the next three months, whilst in services this figure stood at 77 per cent.

This quarter, the percentage balance of manufacturers reporting an increase in their workforce rose to +14 per cent, in comparison to the -3 per cent recorded in the final quarter of 2009. 

Unemployment in Birmingham currently stands at 12.7 per cent but there are signs that the rate is being contained. 

The manufacturing and services could not have fared more differently with cash flow fortunes.

While 37 per cent of manufacturers stated that their cash flow had worsened over the last three months, an increase of 9 per cent, a percentage balance of +15 per cent of services firms noted an increase compared with three months ago, which is an improvement on the five previous quarters.

Tying in with all this is the news that GDP growth in the final quarter of last year was 0.4 per cent, up from the last estimate of 0.3 per cent, and a significant improvement on the 0.1 per cent economists first calculated.