CORRECTED - UPDATE 2-Co-op membership jumps as Britons shun big business

(Corrects date in penultimate paragraph from 2006)

* 300,000 new members in H1; 4.5 million members in total

* H1 profit up 17 pct to 228.8 mln stg

* Growth driven by food business; jump in new bank accounts

* Says economy has bottomed, but sees no quick recovery

(Adds CEO comments, more detail, background)

By Mark Potter

LONDON, Oct 12 (Reuters) - The Co-operative Group, Britain's biggest mutual retailer, attracted 300,000 new members in the first half of its financial year as recession-weary shoppers showed their disillusion with capitalist big business.

"We're seeing a real increase in interest in membership," Chief Executive Peter Marks told reporters on Monday.

He said this was partly down to cash-strapped shoppers seeking a better deal, as all members share a dividend paid out of profits depending on how much they spend with the group.

"But also, we're finding that people are really interested in our business model," he said, pointing to an increase of over 60 percent in consumers opening a Co-op bank current account.

"I think that's down to what's happened in the last couple of years, especially in the financial services sector."

The Co-op, which traces its roots back to the founding of the co-operative movement in Rochdale, northwest England, in 1844, said profit before tax rose 17 percent to 228.8 million pounds ($363 million) in the 28 weeks to July 25.

Growth was driven by the group's grocery business, Britain's fifth biggest, where sales at shops open at least a year rose 7.3 percent, excluding fuel and VAT sales tax.

That beat industry growth of around 5 percent, Marks said, and compares with the 3.7 percent rise on the same basis reported by Tesco (TSCO.L), Britain's biggest retailer, for the 26 weeks to Aug. 29. [ID:nL5512187]

The Co-op, which bought rival food retailer Somerfield last year, said sales of its relaunched and extended low-priced "Simply Value" range were up almost 80 percent year-on-year.

But growth of premium and ethical products was also strong, signalling shoppers are trading down from restaurants to eat at home and remain committed to their values in the recession.

Sales of The Co-op's premium "Truly Irresistible" range and Fairtrade products were both up over 30 percent, Marks said.

He expected trading to remain tough in the second half, when food price inflation was likely to slow to around zero from about 4 percent in the first half.

NO QUICK RECOVERY

"Whilst we think the economy has bottomed out we don't see a sharp uptick," he said, echoing recent cautious remarks from retailers like John Lewis [JLP.UL] and Carphone Warehouse (CPW.L). [ID:nL7622126] [ID:nLG93625]

Marks was upbeat about prospects for the Co-op, however.

"(We're) very confident that we're going to continue outperforming the market," he said, adding this was demonstrated by a step up in marketing spending, including a lengthy television advert set to Bob Dylan's "Blowin' in the Wind."

The Co-op, which has been revamping its food stores, said profit at the grocery business rose 34 percent, while earnings at Co-operative Financial Services, which merged with Britannia building society earlier this year, climbed 11 percent.

The group signed up a record 80,000 new current accounts in the first half, giving it a total of around 1.1 million.

It is trialling bank branches within food shops in a strategy similar to that being adopted by Tesco. Marks declined to say how many stores might get eventually banking services.

The Co-Op, created in 2007 from the merger of The Co-operative Group and United Co-operatives, also runs Britain's third-biggest pharmacy chain, its largest independent travel business and is the number one provider of funeral services.

The group has around 4.5 million members, with around 1.5 million joining through the merger with Britannia, and runs about 5,300 retail outlets. (Editing by John Stonestreet and Hans Peters) ($1 = 0.6304 pound)