Probe Deepens Into UK Citizenship Test Deal

A takeover of the company which administers the test for aspiring UK citizens is expected to be thrown into doubt this week as competition regulators decide whether to deepen their probe into the deal.

Sky News has learnt that the Competition and Markets Authority (CMA) is likely to announce on Wednesday that it plans to open a so-called Phase 2 investigation into Pearson's acquisition of the e-assessments division of Learndirect.

The move will come just days after Pearson completed the £1bn sale of the Financial Times to Nikkei, the Japanese media company.

Regulators' decision to move to a more detailed examination of the deal follows a statement in October that they were considering whether the deal would result in a "substantial lessening of competition within any market or markets in the United Kingdom for goods or services".

Sources said the CMA had opted during the course of its preliminary inquiries to define the e-assessments market "narrowly".

Parties who are subject to a Phase 2 probe are able to offer undertakings to the CMA to mitigate its concerns, although it is unclear whether such remedies would emerged in this case.

The deal represents a modest step in Pearson's journey to becoming an education and training company, after it disposed of the FT and its stake in The Economist newspaper.

John Fallon, Pearson's chief executive, is coming under pressure from some shareholders after a string of profit warnings, although he achieved a price for the FT and Economist which beat City expectations

Its prospective acquisition of the e-assessments division of Learndirect would end four years of ownership by LDC, a private equity group.

If it does get completed, the takeover would see the unit integrated into Pearson's VUE business, which has global operations across school, higher education and job-related testing.

It would also mean that Pearson retains ownership of the Driver & Vehicle Standards Agency (DVSA) testing mandate, which is thought to be the largest online assessment contract in Europe.

Currently being delivered by Pearson, the contract to manage the theory test for learner drivers is due to transfer to Learndirect in September 2016.

Its ultimate retention by Pearson is notable because of a botched procurement process run by Government officials nearly two years ago which left taxpayers saddled with a £2.5m bill.

Ministers were forced to reverse a decision to hand the contract to Learndirect from 2014 after failing to conduct proper checks on the company.

Pearson Driving Assessments issued a formal challenge to the decision, resulting in it being granted a two-year extension.

In addition to the DVSA test, Learndirect's e-assessments division oversees the Life in the UK test for aspiring British citizens on behalf of the Home Office, and numeracy and literacy tests to help select prospective teachers.

The other areas of Learndirect's business, which focus on apprenticeships and adult skills provision, are to be sold through a separate process being run by KPMG.

The brainchild of the Labour government which was elected in 1997, Learndirect was established in 2000 by Ufi, a charitable trust set up to use new technology to transform the delivery of skills across the UK.

The CMA, LDC and Pearson all declined to comment.