Supermarket giant Tesco has reported a surge in half-year profits and rising sales as it hailed efforts to keep prices low amid Brexit-fuelled inflation.

The group said UK and Ireland underlying operating profits rose 21.1 per cent higher to £471m in its first half after it notched up its seventh quarter in a row of rising sales.

UK like-for-like sales in the second quarter lifted 2.1 per cent, although this was down slightly on the 2.3 per cent recorded in the previous three months.

The group has stores in Ambleside, Barrow, Bowness-on-Windermere, Carlisle, Kendal, Millom, Whitehaven, Workington and Ulverston.

Chief executive Dave Lewis said the group was now "more competitive and more customers are shopping at Tesco" as it sought to keep prices low.

He added: "We are continuing to make strong progress. Sales are up, profits are up, cash generation continues to strengthen and net debt levels are less than half what they were when we started our turnaround three years ago."

Sales rose from £27.3bn to £28.3bn, while on a statutory basis, pre-tax profits rose from £71m to £562m and Mr Lewis confirmed that Tesco would resume paying a dividend after nearly three years, with a 1p a share interim payout.

"Today's announcement that we are resuming our dividend reflects our confidence that we can build on our strong performance to date and in doing so, create long-term, sustainable value for all of our stakeholders," the chief executive said.

But the group has come under heavy fire in recent days over its own-brand chicken after it was discovered that its supplier 2 Sisters had taken Lidl chicken and repackaged it under Tesco's Willow Farm brand.

Mr Lewis said the group was as "shocked as anybody" by the undercover media investigation, but said it would keep the brand, which he insisted had a quality specification unique to Tesco.

Its supplier has agreed to shut the facility and retrain employees.

The chain said its inflation was around one per cent less than that across the rest of the supermarket sector as it worked with suppliers to protect customers from inflationary pressures.

Sales of its own-label ranges rose 4.6 per cent in the first half as customers looked for value in the face of rising prices from the weak pound.

On a group-wide basis, underlying earnings rose 27.3 per cent to £759m at actual exchange rates.

The results come as Tesco awaits the findings of an in-depth competition probe into its planned £3.7bn takeover of wholesale giant Booker, with provisional results due from the Competition and Markets Authority later this month and a final decision in December.

Shares in the group lifted two per cent after the results and dividend cheer.

Mr Lewis acknowledged it had been a "testing time" for colleagues after the group recently axed 1,200 roles at its head office and announced it was shutting its call centre in Cardiff with the loss of 1,100 jobs as part of the cost savings drive.

The group is aiming to slash costs by £1.5bn but Mr Lewis said the head office restructuring was now "behind us" and added that it had increased its customer-facing store staff numbers.

Its half-year results for the six months to August 26 also revealed Tesco would ramp up payments into its group pension scheme by £15m a year to £285m from next April as it looks to tackle a hefty deficit.

The group's pension deficit stood at £3bn at the end of March, up around £250m since the last review three years ago.