It has been revealed that over a fifth (21.8%) of West Midlands SMEs experienced a 50% decline in their pre tax profit in 2010 as companies continue to combat the effects of the downturn more than three years after it began.

The findings appear in the newly launched SME Distress Monitor which has been produced by chartered accountants and business adviser Baker Tilly in association with Company Watch, which provides in-depth analysis of the financial health of companies.

The figures are based on 2010 accounts filed with Companies House by 1,435 businesses with a turnover between £5m to £25m based in the region.

The research also reveals that the same percentage of SMEs in this turnover bracket have a current ratio of less than one, which indicates insufficient resources to meet their immediate debt repayments.

Additional findings show that, of those companies in the West Midlands which filed full accounts for 2010, one in ten also reported more than a 30% downturn in sales.

Guy Mander, Restructuring and Recovery Partner at Baker Tilly, says: "Our research highlights how severely short term debt pressures are mounting for SMEs in the West Midlands. As liquidity is tightening, it is essential that business owners take prompt action at an early stage to maximise the financial options available to them, in order to minimise future problems. 

"As we have seen over the past few months in the regional construction, hospitality and retail sectors, the outlook for the high street and business in general is concerning. Implementing strategic safeguards and seeking timely advice will continue to be crucial to surviving these tough economic conditions."

Denis Baker, CEO of Company Watch adds: "This disturbing information is out there in the public domain and being assessed by the credit managers of these companies' suppliers.

"SME managers must engage in proactive dialogue with their key stakeholders to re-assure them that they are safe and stable customers, not just bury their heads in the sand and hope."