Faith schools fail to improve standards and create "social sorting" of children along lines of class, ability and religion, researchers said yesterday.

Academics at the London School of Economics and the Institute of Education, both part of the University of London, found no proof that providing parents with the choice of a religious secondary school either raised results or helped drive up standards in other local schools.

The research suggests that government policies to promote a market in education - by promising parents a choice of school in the belief that the competition for children will improve standards - only create a more socially fragmented system.

The paper concludes that there is "significant evidence that religious schools are associated with higher levels of pupil sorting across schools, but no evidence that competition from faith schools raises area-wide pupil attainment".

The study, seen by the Guardian, tracked 550,000 children in state secondaries in 2005, looking at data on their school type, poverty indicators and exam results. It will be presented at the Royal Economic Society annual conference in Guildford next week. Anna Vignoles, co-author of the study, said: "If faith schools genuinely give parents a choice, what should happen is that with lots of faith schools there is more choice, competition with other schools and standards being driven up. We didn't find that. Even in areas with high proportions of children in faith schools, there is certainly no evidence that standards are higher."

Although faith schools get better exam results, this is because the pupils who attend them had good test results at primary school and are from less disadvantaged backgrounds, measured by factors including whether they qualify for free school meals, say the researchers.

Around 17% of state secondary schools in England have a religious denomination, but there is wide variation across the country. In Westminster, nearly two-thirds are faith secondaries. In contrast, Devon, Gloucestershire and Cornwall all have fewer than 5% faith schools. Rabbi Jonathan Romain, chair of Accord, a multi-faith coalition that campaigns against faith schools' right to select pupils according to religion, said: "Religious discrimination is increasingly hard to justify and the government should not wait any longer before challenging it."

A Church of England spokesman said: "The case for religious schools is not based on the idea of promoting competition between local schools, but rather on the basic right of parents to choose a school for their child that is underpinned by their own religious or philosophical beliefs."

The schools minister, Jim Knight, said maintained faith schools played "a key role in delivering excellent, publicly-funded education in this country".