The tactics used by the European Union’s naval mission – in which Britain plays a leading role – to tackle people-smuggling in the Mediterranean have resulted in more deaths at sea of refugees and migrants, a cross-party House of Lords inquiry has concluded.

The peers say an unintended consequence of Operation Sophia’s policy of destroying smugglers’ boats has been that they have adapted and sent refugees and migrants to sea in unseaworthy vessels, leading to more deaths.

The number of recorded casualties on the central Mediterranean route – between Libya and Italy – rose by 42% to more than 4,500 people drowning in 2016 compared with 3,175 in 2015. So far in 2017 there have been 2,150 deaths.

The report by the Lords’ EU external affairs sub-committee says the bloc’s naval operation has failed in its mission to disrupt the business of people-smuggling in the central Mediterranean and its mandate should not be renewed. The initiative has had little impact on the flow of irregular migrants, which reached its highest level yet in 2016 with 181,436 arriving in Europe by this route.

However, the peers say its search and rescue work, which has involved saving the lives of more than 33,830 people since its inception, should continue.

Lady Verma, the committee chair, said that as people-smuggling began onshore a naval mission was the wrong tool for tackling a dangerous, inhumane and unscrupulous business: “Once the boats have set sail, it is too late,” she said.

“Operation Sophia has failed to meet the objective of its mandate – to disrupt the business model of people smuggling. It should not be renewed. However, it has been a humanitarian success, and it is critical that the EU’s lifesaving search and rescue work continues, but using more suitable, non-military, vessels.

“Future UK and EU action should focus on tackling people-smuggling in source and transit countries, and supporting sustainable economic development and good governance in these countries. Italy has found itself on the frontline of a mass movement of people into Europe, and deserves credit for its efforts to respond.”

The inquiry heard evidence from the Foreign Office that the UK had “been a very strong, indeed leading, contributor to Operation Sophia to date”, with one Royal Navy survey ship deployed on the taskforce of six ships.

Royal Navy officers rescuing migrants in the Mediterranean as part of Britain’s involvement in Operation Sophia. Photograph: Carl Osmond/AP

The peers were told that as of 19 June, 110 smugglers had been arrested as a result of the mission, most of whom were “lower down the food chain”, with only one of the arrests involving a leader of a people-smuggling ring – an Eritrean. The naval ships had been successful in destroying 452 boats that had been used in smuggling operations.

But this had led to a change in the “business model” used by the smugglers, who were no longer sending larger vessels with 500 or 600 people or more aboard which were capable of reaching the centre of the Mediterranean. Instead inflatable boats were being picked up 12 miles off the coast.

The peers say this change, which means 70% of all boats leaving the Libyan coast are now dinghies, has made the crossing increasingly dangerous for migrants and led to the rise in the number of deaths at sea.

The report adds that a unified government in Libya is a precondition for any meaningful action against people-smuggling networks onshore but the political and security conditions in Libya are unlikely to improve to allow onshore operations by the EU any time soon.