Cash-strapped Mayday Hospital is slipping further into debt, prompting NHS bosses to draw up urgent measures to balance its books by the end of the financial year.

Figures reveal Mayday Healthcare Trust owed £1,173,000 more than its agreed target for October this year, throwing its debt recovery plan into crisis.

If no immediate action is taken, it is estimated the trust's deficit will have grown to £2.6million by the end of this financial year.

Overspending has been highlighted as a contributing factor to the "slippage" in its recovery plan and action plans are being drawn up to tackle overspending in four departments - waiting lists, family care, pathology and surgical services.

A finance performance report presented to Mayday's board on Monday said: "The trust has a year-to-date deficit of £1,016,000 at the end of October 2006. This is £1,173,000 worse than the agreed plan at this stage in the year and if no corrective action is taken the forecast year-end outcome is expected to be a deficit of £2.6million. The Trust is developing an action plan to reduce this deficit by the end of this financial year.

"Given the current slippage identified on the recovery plan identification and realisation of sufficient additional Financial Recovery schemes to achieve recurrent financial balance by the end of financial year remains a risk."

In April the Croydon Guardian revealed how Mayday had overspent by £6.8million and that job losses and ward closures were inevitable. Weeks later chief executive Vanessa Wood resigned and was replaced by Helen Walley, who turned around the financial fortunes of her previous trust.

And in August Mayday Healthcare Trust announced it was postponing plans to become an NHS foundation trust for two years because of its cash crisis. A criteria for trusts applying for foundation status is financial stability.

Tony Leonard, director of finance and performance at Mayday said: "The trust is already acting to reduce this deficit to around £1.8m and we are looking at further measures to achieve our financial target.

"Some of the projects in the original plan which were not due to be completed until the end of the financial year have been brought forward, focusing on those schemes which will have the biggest impact on our finances whilst delivering better care for our patients. This includes increasing day surgery rates which in turn means we will need less surgical beds."