A Catholic adoption agency has lost its legal challenge against regulations that prevent it from discriminating against same sex couples.

Catholic Care had until now been the last surviving Roman Catholic adoption agency operating with a Catholic ethos.

The other 10 Catholic adoption agencies either closed down or dropped their Catholic ethos after the introduction of the Sexual Orientation Regulations in 2007.

For the last two years, Catholic Care fought for the right to be exempted from the regulations and continue placing children according to the tenets of the Catholic faith, which considers homosexuality to be a sin.

It was told by the Charity Tribunal, however, that it must consider gay and lesbian parents when placing children. The decision upholds an earlier ruling from the Charity Commission.

The Tribunal admitted that there would be "a loss to society if the charity's skilled staff were no longer engaged in the task of preparing potential adopters to offer families to children awaiting an adoption placement".

It concluded, however, that there was a need to balance the potential closure of the adoption service against the "detriment to same-sex couples and the detriment to society generally of permitting the discrimination proposed".

The Bishop of Leeds, the Rt Rev Arthur Roche, said he was disappointed with the decision.

“It is unfortunate that those who will suffer as a consequence of this ruling will be the most vulnerable children, for whom Catholic Care has provided an excellent service for many years,” he said.

“It is an important point of principle that the charity should be able to prepare potential adoptive parents according to the tenets of the Catholic faith.”