unexpected token import using karma with webpack and babel - karma-runner

Question

I'm trying to run karma tests using karma, webpack and babel. I feel like I've configured properly but it seems that the test files are not being transpiled.
karma.conf:
module.exports = function(config) {
config.set({
basePath: '',
frameworks: ['mocha', 'chai'],
files: [
{pattern: 'src/**/*-test.js', watched: false}
],
exclude: [
],
preprocessors: {
'src/**/*-test.js': ['webpack']
},
webpack: require("./webpack.config.js"),
webpackMiddleware: {
stats: 'errors-only'
},
port: 9876,
colors: true,
logLevel: config.LOG_INFO,
autoWatch: true,
browsers: ['Chrome'],
singleRun: false,
concurrency: Infinity
})
}
webpack.config:
module.exports = {
entry: [
'react-hot-loader/patch',
'webpack/hot/only-dev-server',
path.resolve(__dirname, 'src/index.js')
],
output: {
filename: 'bundle.js'
},
module: {
rules: [
{ test: /\.(js|jsx)$/, exclude: /(\/node_modules\/|test\.js$)/, use: 'babel-loader'},
{ test: /\.css$/, use: ['style-loader', 'css-loader'] },
{ test: /\.less$/, use: ['style-loader', 'css-loader', 'less-loader'] },
{ test: /\.(png|woff|woff2|eot|ttf|svg)$/, use: 'url-loader?limit=100000' }
]
},
resolve: {
extensions: ['.js', '.jsx']
}
};
My test file uses import syntax to import expect from chai and runs a simple test taht expects true is equal true but when I run the karma I'm getting
uncaught syntaxerror: unexpected token import
I've had a look at similar question:
Karma + Webpack (babel-loader) + ES6 "Unexpected token import"
but no luck. I'm sure it's something simple in my configs. Has anyone seen similar?
this is a new project so using latest packages, webpack2 etc.
Any ideas greatly appreciated
C