UBS has reaffirmed its Buy rating on Pearson PLC (LSE:PSON), maintaining a price target of 1,460p and arguing that proposed UK immigration reforms are unlikely to have a meaningful impact on the company’s earnings.
The government’s new White Paper outlines a tougher stance on immigration, with a series of proposed changes to student and skilled worker visa routes.
These include shortening the post-study visa period from two years to 18 months, introducing a 6% levy on higher education providers for international students, and tightening compliance rules for institutions that sponsor student visas.
English language requirements are also set to rise, and dependents will now be required to meet a minimum level of English proficiency.
These changes matter for Pearson, the UK's leading educational publisher, because many UK visa applicants are required to take an approved English test, a service offered by Pearson through its Pearson Test of English product.
The market reaction may be negative, UBS says, but it sees limited financial impact for Pearson.
While these measures are part of a broader international crackdown on student migration, UBS estimates that only about 25% of Pearson's English language testing volumes are tied to UK visa applications.
Moreover, some of the changes could actually support volumes. The new rules expand testing requirements to visa dependents, a group that accounted for 177,000 applications in 2024.
While these have dropped around 60% so far in 2025, the additional testing requirement could help offset weaker demand from primary applicants. UBS also notes that stricter pass standards could result in more people retaking the test, which would boost transaction volumes.
English testing accounted for around 6% of Pearson’s revenue in 2024. Even if UK-related volumes were to fall 10%, UBS sees the effect on overall group earnings as minimal. It forecasts £254 million in adjusted EBIT for the first half of 2025 and expects 2% organic growth, leaving its estimates unchanged.
Despite the unhelpful tone of the new immigration proposals, UBS believes Pearson is well-positioned. With a solid base of non-UK testing demand and growing resit potential, the firm argues the headlines may be worse than the actual impact.
The shares fell 0.6% to 1,174p.