Outlook: Patricia Hewitt signs the nuclear industry's death warrant

EMI/Warner Music; Upbeat Sorrell

Patricia Hewitt could not have made the message plainer if she had turned up wearing open-toed sandals and one of those smiling "No Nukes" badges students used to wear in the 1970s. Even the atomic kitten Brian Wilson seems finally to have wearied of pouring money into the black hole of nuclear development, swapping a one-time preference for a new breed of Sizewells for a sudden passion for wind, wave and sun.

If yesterday's White Paper marks the beginning of the end for nuclear power, then the industry really only has itself to blame. It has consumed tens of billions of pounds in taxpayers money since the late 1950s only for the experiment to end in failure. British Energy, the nuclear generator which dares not speak its name, is only surviving thanks to a £3bn bail-out from the taxpayer. The problem of what to do with spent nuclear waste looks as intractable as ever.

Without any new nuclear build, the industry will be a shadow of itself in 15 years and almost non-existent in 20. Were it not for the fact that it is probably cheaper to keep British Energy's reactors open until they reach the end of their lives – thus ensuring they pay for at least part of their decommissioning costs – then the nuclear run-down might be happening even faster.

The nuclear industry was keeping a stiff upper lip yesterday as it mouthed platitudes about what a jolly sensible approach to energy policy it all was. There is quite a bit of hot air in Ms Hewitt's environmentally friendly prose. In place of firm commitments, the renewable lobby has had to make do instead with aspirations, ambitions and exhortation. But if renewables really can deliver it is Armageddon for nuclear.

Its only hope of salvation lies in a belated realisation that the alternatives may be no more palatable and, in some cases, perhaps even less so. Wind power is all very well until developers start building turbines in your back garden, as they will be forced to if wind power is to deliver in the way anticipated. There is also the uncomfortable fact that the Government's new energy trading arrangements has the perverse effect of making dirty old King Coal more attractive in the short term, not less so.

In search of the holy grail of a low-carbon economy, Ms Hewitt is putting a frightening degree of faith in continuing supply from unsavoury regimes in unstable parts of the world. Do we really want to make ourselves so dependent on others? Keeping hold of nurse for fear of finding something worse is not much of a motto for nuclear to go forward with, but after yesterday's White Paper, it's the only one the industry has got.

EMI/Warner Music

News that EMI is once again talking to AOL Time Warner about the possibility of buying Warner Music shouldn't have surprised anyone. Alain Levy, EMI's head of recorded music, has made little secret of his desire to acquire this prize asset, while AOL Time Warner's well chronicled problems mean the music interests might actually be for sale. However, any such deal would be fraught with problems, and if it can be done at all, it is still some distance off.

Problem number one: where's EMI going to get the money from? AOL Time Warner would for choice want a cash exit, but EMI would be hard pressed to lay its hands on the $3bn plus it might cost. The stock market might be persuaded to back such an obviously advantageous consolidation, but with the share price flat on its back, this would not be the most opportune time to raise new equity. Moodys yesterday announced it was considering a further downgrade of EMI's debt, making the environment more hostile still for deal making.

Problem number two: EMI has tried and failed already to get a merger with Warner Music through the competition authorities. What makes Mr Levy think he can succeed? Over the past year, the European Commission has been forced to rein back on some of the sharper edges of its mergers policy. Its thinking might have changed sufficiently to allow a deal of some sort. The trouble is that no one really knows until they try and, having been badly embarrassed once before, EMI is understandably wary. The board doesn't want to end up with egg on its face again.

Even so, the prize is a big one, and although EMI's room for manoeuvre may be limited, it looks a good sight better than anyone else's. Both Sony and Bertelsmann are dead in the water, while Universal is far too big already to be allowed to gobble up anything else. EMI's share price may be close to its all-time low, but that's more down to fears that the music majors as a whole are about to be disintermediated by the internet than any lingering concern about EMI's quality of management.

Under Mr Levy, EMI has made excellent headway in addressing costs. It has also achieved some notable creative successes with Norah Jones and Coldplay, both award winners in this week's Grammys. EMI is the world's biggest player in music publishing, which essentially means looking after royalty payments from broadcast use of music. Boring, maybe, but a fantastically lucrative and stable source of earnings for EMI with margins of 25 per cent plus and annual profits well in excess of £100m – so stable, in fact, that it's a wonder EMI has never thought of securitising it and handing the money back to shareholders. For the time being, however, it's a great safety net for EMI recorded music to have.

The industry's obvious travails may provide EMI with the argument it needs to convince Europe the long sought after consolidation should be allowed. Any such merger would help the share price but it won't provide a long-term solution. Technology is transforming the way music is distributed, and the music majors have been particularly slow and poor in their response. The City would welcome a Warner Music deal, but it also needs to be sure that it's not being asked to buy a dead parrot. It doesn't matter how many Grammys are won, EMI's investment standing won't improve until it can find convincing solutions to the burgeoning problem of unauthorised internet downloads

Upbeat Sorrell

Sir Martin Sorrell, chief executive of WPP, has become known in the trade as a bit of a prophet of doom, but he's also been proved right in casting doubt on the likelihood of an early bounce back in advertising spend. Few would disagree with his prognosis for 2003, although actually the Advertising Association does. You'd be wise to plan not on the AA's forecast, but on Sir Martin's view that this year will be a little bit better than last, but not much. Revenues finally seem to be on an improving trend again, but that could all be knocked sideways by war against Iraq, and Sir Martin doesn't anticipate any meaningful recovery until next year.

In these circumstances, WPP is perhaps being a little ambitious in targeting a margin improvement of one percentage point this year and half a point next. Sir Martin has missed his margin targets for two years running now, and it's a big ask to achieve any kind of an uplift in a flat year for revenues. Still, WPP presumably knows what it is capable of, and the 20 per cent hike in the dividend announced yesterday certainly demonstrates a high degree of confidence in the long-term future.

On this front Sir Martin remains reassuringly bullish. He puts the case far better than I can, so I'll let him speak for himself. "Overcapacity of production in most sectors ... underpins the need for our clients to continue to differentiate their products and services. Advertising and marketing spend should therefore resume its growth as a proportion of GDP, and once more bust through the cyclical high established in 2000". This is not the sort of message prophets of doom are known for, but then Sir Martin wouldn't be in advertising if he was really a gloomster.

jeremy.warner@independent.co.uk