One of the most painful aspects of the long drawn out economic slump is the effects that it has had on UK tax revenues. In June, Britain reported its highest budget deficit for a month for sixteen years, a massive 13 billion pounds, which was an increase of almost 50% from the same month in 2008.

To support these shortfalls, the Treasury has no option but to borrow, and this they have been doing, and in some style. In the first quarter of the UK financial year, which started in April, public sector borrowing reached £41.2 billion, the highest quarterly figure since records began in 1946.

China Investment Corp, (CIC) China’s sovereign wealth fund has acquired 1.1 per cent of the Diageo drinks group for £221million, which makes the fund the UK-based groups’ ninth-largest investor. Shares in Diageo were up 2.4 per cent to 906p after the announcement

CIC manages $200 billion of the country’s $2,132bn held in foreign exchange reserves also holds a 0.5 per cent stake in Tesco, Britain’s largest retailer.

Domino’s Pizza reported a double-digit increase in sales and profits for the six months to the end of June and raised its interim dividend by almost a third.

Continuing to be one of the few consumer-facing companies to defy the recession, the Domino’s Pizza chain, the UK’s largest pizza delivery service with more than 500 outlets, said it expected to beat full-year profit forecasts thanks to unrelenting demand for their takeaways. Domino’s Pizza U.K. & Ireland advanced 7.2 percent to 235.25 pence.

On the FTSE U.K. pub owner and brewer of Old Speckled Hen ale Greene King Plc, added 3.1 percent to close on 432.75 pence.

Food retailers were also among the rising stars shares in Wm Morrison Supermarkets up 8.2 per cent to 274pence after the announcement that they expected full-year profit to exceed current guidance as it reported strong volume growth over the first half.

Sainsbury also added 3.1 per cent to 326p, while Tesco climbed 1.4 per cent to 375p.

The retail sector showed mixed results with fashion retailer Next despite raising their profit forecast for the first half, retained a cautious outlook. On the news shares in Next fell by 1.6 per cent to 1618 pence.

Shares in the Home Retail Group, owners of Argos and Homebase, gained 1.3 per cent to close on 293 pence

London equity markets overcame an early bout of profit taking on Tuesday to extend their winning run to seven sessions.

The benchmark FTSE 100 was up 38 points to 4,481.17, while the FTSE 250 gained 75.95 points to 7,742.58.

The pound lost ground on Tuesday as concerns grew over the health of the UK government’s finances.

• Pound/US dollar 1.6422
• Pound/Euro 1.1578
• Pound/Japanese Yen 153.8127
• Pound/Swiss Franc 1.7553

Testifying before the House Financial Committee in his twice-yearly report on monetary policy, chairman of the US Federal Reserve, Ben Bernanke announced that US interest rates are likely to remain "exceptionally low" for some time. He went on to explain that low interest rates and a stimulus plan had buoyed the economy.

US stocks lost some of its Monday’s impressive gains on Tuesday, after rising during the morning, but then falling back as Ben Bernanke, addressed Congress about the future of US Federal Reserve policy.

On Wall Street , the Dow Jones continued its steady rise, rising 45.05 points to 8893.2 while the NASDAQ rose 3.55 points to 1912.84.

Sharply falling tax revenues are also beginning to have their effects across the US. Of the 50 states45 reported budget shortfalls and overall tax collections dropped by 11.7 per cent, the largest fall on record.

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