Thanks for your responses so far guys. Just to clarify, there has not be a manual penalty, just a hit from the Penguin 2.1 algo update on October 3rd.
My concern is that given that there is not manual penalty, we can't ask for re-consideration and therefore have no idea when the next algo update will happen and if it will fix the problem.
With regard to traffic, they are getting around 500 visitors a month from direct traffic and almost nothing from referrals, however I was thinking that I would just set up an automatic redirect of the domain, or alternatively just set up a simply page telling customers 'we've moved'. The domain would be similar, so brand name recognition would be ok going forward.