Industrial action at the three State development agencies, Forfas, IDA Ireland and Enterprise Ireland, is due to escalate tomorrow when SIPTU workers will cut off all email communications.

The action began yesterday when up to 750 SIPTU employees, or half the workforce at the three agencies, refused to answer telephones. If the dispute continues, workers will refuse to operate computers from Friday and will begin random picketing next week.

In a statement, management at the three agencies said they seriously regretted the action, adding they would "endeavour to ensure that any impact on services to our client companies is minimised". as said it was willing to meet the union at any time. He added fax lines remained open for anyone who wished to contact the agencies.

The dispute centres on the operation of different pay grades within the agencies. SIPTU claims there is a pay differential of up to 40 per cent between workers doing similar jobs.

The Labour Party spokesman on Public Enterprise, Mr Emmet Stagg, blamed the Tanaiste, Ms Harney, for creating the unrest through a "bull in a china shop" approach to delicate industrial relations matters.

He said Enterprise Ireland was established by the Minister for Enterprise, Trade and Employment "without any specific consideration as to the industrial relations and staff deployment issues arising from the merger of three agencies, namely Forbairt, An Bord Trachtala and elements of FAS".

The Fine Gael spokeswoman on Enterprise, Trade and Employment, Ms Nora Owen TD, said the Minister had been forewarned about potential industrial relations difficulties in Forfas as long ago as last June.

"The Minister must now clearly outline what steps she is taking to resolve the situation, considering the threat this action may well have on Ireland's efforts to encourage inward investment." SIPTU in a statement, said it had followed all of the agreed procedures to date and had no choice but to proceed with the action.