Poundshops used to be a bit of a joke. In one legendary comedic sketch Catherine Tate’s nan once declared the proposition “a load of sh*t”.

No one is laughing now. Especially not in the City. Poundland’s float in March last year proved one of the few new listings to keep its share price above water in 2014.

Poundstretcher is also in strong growth. And last week the sector received another shot of legitimacy when US investment giant TPG bought up Poundworld in a £150m deal. TPG is a serious player in international retail and leisure - having previously invested in Burger King, Prezzo, Lenta and Victoria Plumb. And TPG sees the fixed-price discount sector as one of the standout growth opportunities in retail, according to a leading City source.

“TPG views this as an up-and-coming sector within the fmcg space that can continue to gain market share,” he says. “It’s not a fad anymore - these discounters are now a core part of the retail landscape and are really causing a storm.”

TPG’s rationale for the investment is it gives it a stake in the “continuing rise and evolution of the value retailer” - importantly not seeing a marked demarcation between the fixed-price retailers and the rest of the booming UK discount market.

Debate has been sharpened by Poundland’s attempted takeover of 99 Stores, with the CMA now investigating that deal in depth. The CMA was unmoved by Poundland’s argument that its direct competitors constitute a wider group than merely the other fixed-price discounters. Its stance has frustrated and mystified people in even measure - with most industry observers convinced the pound shops are now taking away custom from a host of retailers, not least the struggling supermarket groups.

“They are not operating in a vacuum and simply competing against each other,” says Canaccord Genuity analyst David Jeary. “Consumers are using these stores completely as top-up shop visits, which you can see from Poundland’s average basket value of £4.50, so they’re certainly competing for that convenience spend.”

Statistics collated by The Local Data Company seem to back that, with 57% per cent of UK adults now using Poundland, 99p Stores, Poundstretcher, Wilko and B&M Bargains, up from 36% a year ago. 

“There are lots of typically supermarket items that people consider to be better value at pound shops,” says LDC director Matthew Hopkinson. 

The majority of product lines at the pound shops are not grocery-related, the availability of chilled and fresh is limited and only Poundworld is dipping its toes in online currently. However, Poundland’s recently published statistical survey submitted to - and partly accepted by - the CMA, shows strong crossover between it and the grocers. It found the “diversion ratio” (ie where lost sales from Poundland go) was just as high for Tesco and Asda as it was for 99p Stores and Poundworld, and higher than for sales lost to Aldi, Lidl, Boots and WH Smith.

TPG’s investment will first of all accelerate Poundworld’s efforts to reach its stated target of 400 UK stores. TPG will also use its retail investment experience to help Poundworld build the infrastructure it needs to grow its reach and product offering by streamlining supply lines and developing more advanced data analytics.

Poundworld is far from the only fixed price discounter with their eyes on expansion (see table). But Jefferies analyst Caroline Gulliver questions whether this estate growth - some 250-300 new single price point and general value retail stores every year - will see the sector’s players start to cannibalise each other’s sales.

“We believe this will put pressure on sales densities, and that the single price point retailers are most exposed, particularly Poundland given its existing high penetration,” she says.

She also adds that poundshops have low customer “net promoter scores” which “suggests a harder path to growth than they have historically achieved.”

Under this thesis, the chief victim of TPG supercharging Poundworld’s growth could be Poundland.

One consolation for the sector leader is that at least that prospect might finally get the CMA off its back.

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