Income trusts powered Canada’s market for initial public offerings last year and will contribute to future economic growth, PricewaterhouseCoopers said today.

According to the firm’s annual survey of IPO’s, there were119 new issues during 2005 with a total value of $7 billion, up from 87 IPOs at $6.1 billion in 2004.

PwC noted “high levels of activity in both traditional equities and income trusts,” but 40 income trusts accounted for $5 billion of the 2005 IPO total, a 61% increase in value over the previous year.

The full-year increase came despite a halt in income trust activity between Ottawa’s September 19 freeze on advance tax rulings for income trusts and its November 23 announcement that trusts would remain free of corporate tax and that taxes on dividends would be reduced.

The most important news lies beyond the market statistics in the positive economic contribution of income trusts, said Ross Sinclair, leader of PwC’s practice in IPOs and trusts.

Some observers fear that trusts cause enterprises to skimp on investment in future growth in order to make their cash payouts to unitholders, but “our research illustrates inarguably that the structure of income trusts encourages them to grow and prosper, and not simply be an efficient distribution vehicle for the profits of mature businesses,” Sinclair said, in a release.

He argued that trusts give businesses greater access to capital markets, fuelling higher sales and boosting capital spending.

“Indeed, access to this capital may provide income trusts and other flow-through enterprises with a global competitive advantage,” he said.

PwC said in its submission to the federal govement’s abbreviated policy review on trusts that sales by Canadian income trusts committed $21 billion to capital spending in 2004, or 376% of net income.

The country’s 200-plus income trusts ended 2005 with an aggregate market value of more than $185 billion, PwC said, up from $111 billion in 2004 and accounting for more than 10% of the total Canadian equity market.

On a sector basis, oil and gas was the most active in 2005, with 18 offerings totalling more than $1.4 billion.

The consumer products group followed with 12 IPOs worth $918 million while industrial products companies completed eight IPOs worth $985 million.