Almost a quarter of small and medium-sized businesses have suffered a 50 per cent drop in their pre-tax profit, according to figures compiled from Companies House by Baker Tilly and Company Watch.

Their research – based on the 2010 accounts filed by 19,780 companies with a turnover between £5m and £25m – found that 24 per cent of those businesses may now have insufficient resources to meet their immediate debt needs.

A quarter of the sample had experienced a sales fall greater than 10 per cent in 2010, while one in ten had seen sales fall by more than 30 per cent.

David Hudson, who heads Baker Tilly’s formal insolvency team, said: “We have been living in a somewhat artificial economy over recent months where stability has been seen to be settling, aided by quantitative easing and low interest rates. However, the cracks are now appearing as inflation rates and shifts in the market are challenging this fragile state.”

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