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Ok the basic position is that there is no legal requirement to advertise a job. A company is legally entitled to employ whomsoever it wishes into a role provided that in so doing so it does not discriminate on the basis of age, race (including nationality), religion, sex, disability or trade union membership.
You do have an argument that this promotion discriminates against you on both of the grounds you highlighted. The good news is that you do not have to resign to claim at the employment tribunal on this basis. You may however feel uncomfortable in your employment if you resign without doing so.
You will be criticised if you bring a claim without attempting to raise matters internally. Despite the fact that there may be an element of bias with your manager's manager the grievance should initially be addressed to him. If satisfactory reasons (which are non-discriminatory) are not given then you may claim at the employment tribunal using the form you will find at www.employmenttribunals.gov.uk
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