Pearson Education, part of the publishing company which owns the Edexcel exam board, has been named as preferred bidder for a contract worth at least pound;25 million a year to mark key stage 2 and 3 tests from May 2005.

The company will also be responsible for collecting and distributing the results, and marking and data collection relating to tests for Year 7 youngsters and optional tests for primary pupils.

The decision is a set-back for the AQA board, which currently marks the tests and was shortlisted alongside Pearson. Some 1.2 million pupils take KS2 and KS3 tests in English, maths and science every year.

Pearson, which acquired Edexcel for pound;20m a year ago and runs the largest test-marking business in the United States,is now poised to expand its role in British testing.

The company could soon be responsible for developing the key stage 2 and 3 maths tests, having been shortlisted for a pound;1m-a-year contract.

It has also been leading the way in the drive to introduce electronic marking into the exams system.