Blues chairman David Gold has said that boss Trevor Francis will have funds at his disposal to strengthen the squad for next season, but will not reveal exact figures to avoid alerting the 'vultures' in the game.
Hughes, 25, was instrumental in helping The Baggies reach the play-offs against the odds in Gary Megson's first full season in charge at The Hawthorns, building a formidable partnership with former Wolves and Bristol Rovers hit-man Jason Roberts.
However, Hughes's contract expires at the end of next season and Birmingham are hoping to test the water with a substantial bid for the former roofer.
West Brom have begun negotiations over a new deal with Hughes, who has become a terrace idol since his £350,000 switch from Kidderminster in 1997.
The Baggies are preparing a package that would see Hughes become the highest-paid player in the club's history, but if he fails to agree terms, West Brom may be forced to cash in on their prize asset or risk losing him for nothing once his contract expires.
