The number of NHS providers booking a financial deficit dropped 20 percent during the first quarter of 2016/17, according to new figures released by NHS Improvement.

The provider sector is showing an overall deficit of £461 million in the quarter, which is £5 million better than the planned deficit and "in marked contrast to recent years," the regulator said.

Of the 214 trusts that accepted control totals, 185 met their quarterly funding targets, giving them access to payments from the Sustainability and Transformation Fund, a £1.8-billion cash pot designed to help trusts reduce deficits.

According to the latest quarterly performance report, providers are "tightening their financial grip" and the provider pay bill is £9.8 million better than planned, helped by crack down in agency staff costs which has saved around £500 million compared to predicted spend over the period.

"This is a crucial year for the NHS. Today's results have demonstrated that providers are up for the challenge and are starting to get a grip on their finances. It's early days - and there is still much work to be done - but today's figures demonstrate that providers are meeting some of the ambitious plans that trusts boards have signed up to and this is a promising start to the year," noted Jim Mackey, chief executive of NHS Improvement.

"This time last year the overspend stood at nearly £1bn, so it's positive to see the NHS finance picture in a better position. Yet, the results can only be viewed as work in progress," commented Paul Briddock, director of policy at the Healthcare Financial Management Association (HFMA).

"The demands on the NHS are extremely high, with waiting times struggling to hit targets, and patient numbers set to increase during the winter months. We must therefore move forward with caution, but it is clear that finance directors are tackling the challenge head on and setting good foundations for the coming year."

Richard Murray, director of policy at The King's Fund, welcomed the reports finding that new investment and actions taken to tackle overspending have reduced deficits, but stressed that "it would be a mistake to suggest that the financial pressures which have engulfed the NHS have eased".

'Worrying decline'

"While overall NHS trusts met their financial targets in the first quarter, our new survey of NHS finance directors shows only a third are confident this will be the case by the end of the year. It also shows a worrying decline in confidence among commissioners, with twice as many clinical commissioning groups forecasting end-of-year deficits than at this time last year."

He also argued that "demand for services is rising rapidly, waiting times are continuing to worsen and NHS leaders have been charged with delivering significant changes to services," and that while extra investment and staff efforts mean that NHS organisations just about coping for the time being, "the service is reaching a critical point".

Stephen Dalton, head of the NHS Confederation, said the early figures are "encouraging", but cautioned that it is too soon "to determine whether extra money this year will genuinely help providers become more financially stable."

"As the NHS moves on from a terrible financial year, we must use this critical opportunity to get the NHS back on track so that we can set the foundations for vital transformation plans to make progress".