The three-year package, worth 13.1 per cent, ended an increasingly bitter dispute that had threatened to wreck the degree examinations of more than 300,000 students.

The University and Colleges Union (UCU) decided to call off its boycott after agreeing to ballot its members on the offer from the Universities and Colleges Employers Association (UCEA).

Talks broke down last week after the union, which had been demanding a 23 per cent increase, rejected a similar offer from the employers. The UCEA said then that negotiations had “reached the end of the road”.

An agreement on an independent review of university finances and salaries, which will report back in autumn 2008, appeared to have broken the deadlock.

The union suspended industrial action from midnight last night, allowing members to set and mark exams and coursework.

The UCU is the product of the merger of the Association of University Teachers and its sister union NATFHE on June 1.

Sally Hunt and Paul Mackney, its joint general secretaries, said: “No settlement ever provides everything that you want for members, but we believe that this is the best that can be achieved within the current national negotiating environment.

“Members will see significant increases in their salaries over the next two years, but we are acutely aware that this will still not make up the ground lost over the past decades.

“We will continue to make the case for higher staff pay in the future, including to the independent review.”

The UCU thanked the National Union of Students (NUS) for its support and pledged to “ensure the dis- ruption is kept to a minimum and that students will be graduating on time”.

A number of student unions have broken ranks with the NUS and accused lecturers of damaging the interests of undergraduates.

Geoffrey Copland, chairman of the UCEA, said: “Employers are delighted because every effort has been made to put negotiations back on track. We are particularly pleased that the immediate suspension of industrial action will stop disruption for students and allow completion of examination processes.”

The boycott of marking, which started in March, has left 300,000 final-year students wondering if they would be able to graduate this summer.

Universities had put in place contingency arrangements that would have awarded unclassified degrees, based on work already completed, or the option of sitting final exams later in the year.

A survey last month showed that exams had been cancelled or postponed at one in five universities because of the industrial action by academics.

The pay deal will give lecturers the greater of 3 per cent or £515 in August, followed by 1 per cent in February and another 3 per cent in August 2007.

They will get the greater of 3 per cent or £420 in May 2008. They will be awarded a 2.5 per cent increase in October 2008, or a sum matching the level of inflation.

A UCU spokesman stressed that it expected “at least” that amount, but would want more if the review showed that university incomes had improved sufficiently through higher student tuition fees to justify a better pay award.

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