Private equity firm Silverfleet Capital, the owner of discount department store TJ Hughes, is warning of a very bleak year for retailers generally in 2009, but says there will be lots of merger and acquisition (M&A) activity in the form of distressed purchases, refinancing and equity injections.

According to Silverfleet's retail sector expert Gareth Whiley: "The watchword for several years now has been Value for Money. In 2009 it will be Value for Less Money.

"Consumers will continue to trade down. Non branded value retailers such as Primark and Aldi and branded discounters such as TJ Hughes have seen a marked shift," he says.

The Internet will remain important - primarily for price-driven shopping. There may be a chance for established retailers to grow market share as people turn to trusted brands, provided their prices are competitive.

The middle market, such as M&S, Next and Debenhams, is also likely to continue to suffer "as people seem willing to "skip" over it to go straight to value and discount retailers."

And some suppliers will go to the wall and may take unprepared retailers with them.

On the M&A front there will be lots activity but little of it will be conventional. Distressed purchases will be common such as Philip Green's involvement with Baugur and any retailers backed by the Icelandic banks generally.

Refinancing, equity injections and covenant resets will continue apace. But there will be very little, if any, debt available for private equity deals in the sector.

"The first deals to be done are likely to be "low-rent model" deals with internet or concession-based retailers or retailers owning freehold," Whiley says. "A period of relative economic stability will be needed to really ignite volumes.

He also believes that contrary to some predictions, luxury brands will suffer as "mass affluent" money dries up.