If there is a 1% error in a flow measurement meter, how will this influence the leak detection sensitivity and how much error can we expect on the leak location estimate?

The leak detection sensitivity does not depend on the accuracy of an instrument, it is dependent on the repeatability of the instrument.

The effect of instrument error on leak location accuracy depends on the leak size. It is therefore not possible to give an absolute figure in the error that such a deviant instrument will cause in the location estimate.

For example: for a leak greater than 5%, the location estimation error is expected to be around 5%, if the flow meter has a 1% error and the pressure meter has a 0.2% error.

For smaller leaks, the location error will be greater because the information generated by these leaks is heavily distorted by the instrument errors.