TESCO shrugged aside fears of slower growth in its UK stores yesterday after its overseas expansion helped to fuel a 13.3 per cent increase in first-half profits.

Chief executive Sir Terry Leahy said the group was taking market share from its rivals and that shoppers were still prepared to spend despite economic uncertainty.

Like-for-like sales in Tesco's UK business rose 3.9 per cent in the six months to August 10, against 7 per cent last year when the sector feasted off stronger inflation and the consumer boom.

Sir Terry said: ''Our recent polling suggests that confidence is pretty good at the moment. Everyone has got a job, interest rates are low and house prices are going up. The outlook is cautiously optimistic.''

Tesco now runs stores in ten countries worldwide and sales across its growing empire rose 10.6 per cent to £12.7bn in the half-year. Underlying pre-tax profits climbed £64m to £545m.

The group is market leader in Ireland, Thailand, Slovakia and the Czech Republic as well as the UK. It overtook Sainsbury's when Sir Terry took charge five years ago.

Operating profits in Tesco's international division rose 79 per cent to £59m as the group stepped up its opening programme. It hopes to have more selling space overseas than in the UK by 2004.

The group opened 37 new stores in the UK in the first half, helping total sales at home climb 6.8 per cent to £10.5bn. Sales at its Tesco.com home shopping arm rose 27 per cent to £186m.