TESCO cast a shadow over its surge in half-year profits of more than £900m yesterday when it flagged up concerns over soaring oil-related costs.

Even though the retailer underlined its dominant position in the supermarket sector with a 19 per cent profits rise, shares fell as investors worried about a warning that costs could be as much as £60m above budget this year.

Tesco also cautioned about the impact of higher energy bills on consumer confidence, but insisted that it was set for progress in the second half.

In a "more challenging year", Tesco's figures still beat City expectations with profits of £908m and a total sales rise of 14 per cent to £18.8bn.

In the UK, where the retailer is estimated to account for about £1 in every £8 spent, Tesco outstripped rivals with a 6.7 per cent rise in like-for-like sales.

Much of the growth has come from non-food, where a sales rise of 13 per cent to £2.8bn highlighted the extent to which the retailer has grabbed business from more established operators such as WH Smith, Boots and B&Q.

The growth has fuelled concerns about the dominance of the chain, which has 30.5 per cent of the grocery market when stripping out the impact of multi-format retailers such as Marks & Spencer.

Friends of the Earth and The Forum of Private Business are among groups to voice disquiet about the impact on suppliers and smaller retailers, while the boss of Asda owner Wal-Mart joined calls for Tesco's position to be looked at.