The West Midland economy is slowing down across all sectors, say regional business leaders.
Service, retail and agricultural companies are now feeling the pinch along with manufacturing, Mike Beasley, regional chairman of the CBI, cautioned.
Speaking after the first meeting of the council since the collapse of MG Rover, which accounted for 1.2 per cent of regional GDP, Mr Beasley said: "There is no doubt the economy is tightening."
Companies are across all sectors are laying off employees in response to falling levels of activity and rising costs.
But Mr Beasley and CBI regional director Chris Clifford stressed they did not believe the economy was drifting towards recession.
"There are some bright spots, but traditional manufacturing, which forms a larger part of the regional economy than in other regions, is definitely struggling," Mr Beasley said. "Every sector is saying that things are either static or not so good as before. The situation is nowhere near as robust as it was a few months ago."
Mr Clifford added: "The problem is that other parts of the economy, such as the service sector, which have buoyed up the region as manufacturing has cut back, are now slowing down themselves.
"Retailers, for example, are in a hell of a mess because rising council taxes and utility bills mean that consumers are becoming cautious and are spending less." Mr Clifford warned that industry would not now be able to withstand any further rises in business taxes and added that the Government could "kill the golden goose".
The CBI, locally, is also calling on the Government to draw up an energy policy to reduce the country's dependency on imported natural gas and invest in infrastructure.