A gruelling nine hours of talks failed to end with a revised pay offer on Monday, but unions insist that they remain optimistic as they prepare for a return to the negotiating table on Wednesday.

Ivor Jones, employment policy director at the Association of Colleges, said: “Both sides negotiated throughout the day but time ran out.

“I am looking forward to going back to the table to meet the unions next week.”

Mr Jones added that the talks are “constructive.”

Unless there is a deal, the lecturers’ union Natfhe is expected to stage a one-day strike on January 30, alongside Unison, representing support staff, and the Association of Teachers and Lecturers.

Paul Mackney, general secretary of Natfhe, said: “We are optimistic and we do think the principals are keen to settle.

“We are dealing with 10 years of neglect and it takes time to sort that out. But I think there is a very good chance that we will have a deal on Wednesday.

“We are keen to look at the new money and the modernising pay agenda, but we need to see a catch-up element this year as well.”

The Association for College Management, which has not balloted for strike action but has been involved in the negotiations, says the AoC should “take a lead” and bring the dispute to an end.

Peter Pendle, general secretary of the ACM, said: “I am bitterly disappointed that it is still not possible to conclude discussions on this year’s pay dispute - so that we can get on with dealing with the issue of the modernising pay agenda and with allocating the additional funding to bring managers, lecturers and support staff into line with employees elsewhere.”

There were renewed hopes of a pay settlement in November when Education Secretary Charles Clarke announced that college funding would increase from pound;4.4 billion to pound;5.6 bn in 2006.

An FE Focus survey published last week showed that principals’ pay packages had increased by as much as 30 per cent last year, with the number earning more than pound;100,000 a year having almost doubled.