Industrial action could sweep university and college campuses this year as funding cuts force lecturer redundancies and rule out pay rises.

Lecturers' unions say they have little choice but to push for "substantial" pay increases. Both Natfhe and the AUT are determined to reduce the growing pay differential between their members and those in comparable jobs.

But employers' organisations say that Government cuts to university and college budgets could rule out pay rises. Steve Rouse, chief executive of the Universities and Colleges Employers' Association, said: "I think this will be a very difficult year as far as pay is concerned. It is possible there will be a reduction in staff."

Roger Ward, chief executive of the Colleges Employers Forum, said: "Our sympathy is with the lecturers but it is too early to say whether or not we will be able to fund any award that meets their expectations."

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Lecturing jobs in the FE sector are most at risk as colleges struggle to cope with the abolition of their capital grants, but there is also no guarantee that university lecturers' jobs are safe.

According to Natfhe, more than 100 colleges have already proposed redundancies and lecturers in many institutions are actively considering industrial action. Sue Berryman, Natfhe's chief negotiator for the FE sector, said: "We always hope to avoid industrial action but things are looking very grim."

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Tom Wilson, assistant general secretary of the AUT, said: "Our members are pretty angry and we will be asking for a substantial increase. If this, or at least some token of goodwill, is not forthcoming then we will not take it lying down."

Pay reviews are due for FE lecturers on August 1, university lecturers in the old institutions on April 1 and lecturers in the former polytechnics on September 1. However, much is expected to rest on the school teachers' pay review report due in February.