Tesco has reported a 1.5% rise in group first half pre-tax profits to £1.4bn.

Tesco said profits had been held back by higher interest payments on borrowings to pay for its two big acquisitions last year, Homever in Korea and Tesco Bank.

For the 26 weeks ending August 29, group sales including VAT grew 8.3% to £30.4bn.

Tesco chief executive Sir Terry Leahy said that he believes the UK economy is through its “low point”. However he believes the recovery would be “slow and steady”.

In the UK, like-for-like sales excluding petrol were up 2.7%.

Last week Tesco launched its online clothing shop which it hopes will open up its fashion offer for customers who are not close to its larger stores.

Tesco said its non-food business remained resilient through the downturn as customers searched for good value products. Total non-food sales in the UK grew 4.9% with clothing sales up 6.6%.   

The grocer has also renamed its Tesco Personal Finance business as Tesco Bank “in recognition of our longer-term objective of creating a full-service retail bank for Tesco customers, offering a range of banking and insurance services through branches in stores and online”. Total retailing services were up slightly on last year to £1.7bn.

For its international business Tesco said that sales in its Asian markets grew 26.9% to £4.3bn with a growth in Europe of 0.9% to £4.7bn.

For its US Fresh & Easy business Tesco’s losses grew 41.7% to £85m due to expansion costs. It said it was making good “progress” with the chain and last month launched its first full marketing campaign. It expects to open stores at the rate of one per week this year.

Leahy said: “Tesco’s core strengths are even more important as we tackle successfully the challenges of recession. Our focus on the customer, the consistency of our strategy, an efficient business model, strong local management teams, and a spirit of innovation and knowledge-sharing, have enabled us to improve the shopping trip for customers - by investing in consistent value they can trust and in rewarding their loyalty through Clubcard - whilst at the same time delivering a robust financial performance.”