You'd better be careful with Paul McGuinness, a veteran music industry hack had warned me. He's a right old moody sod. He can turn on the charm when he feels like it, but he doesn't put up with much. He blacklists journalists who annoy him or criticise the band. He's used to playing hardball. He bears grudges. Just don't say anything stupid. And don't get anything wrong. If you remember that you'll be all right.

By the time I arrive to meet McGuinness, backstage at the first of U2's two homecoming gigs at Slane Castle, I've had a little too long to worry about this warning. And walking into his soulless office, inserted between the dressing rooms of support acts Kelis, Coldplay and the Red Hot Chili Peppers, doesn't do much to ease the heebie-jeebies. There's a solitary plant in one corner, a handful of anodyne furnishings, and hardly any light at all. The 50-year old pop supremo -- he is 10 years older than the band -- sits in the corner of the room, looking very serious. And very efficient. And -- to be frank -- rather portly. It feels like a scene from The Godfather. When he speaks, I fully expect him to break into a hoarse, rasping Don Corleone-style drawl. It's a surprise and a relief, therefore, to discover that he actually speaks pretty normally, although with a slightly strange English/Irish accent. It turns out that the music hack might have been overdoing it. McGuinness, at least today, seems positively chirpy.

It's a very special, very exciting day for him and the band, he begins. It's the first time U2 have played a concert in their home country since 1997. Furthermore, they haven't played this particular venue, about 30 miles north of Dublin, for 20 years -- the last time they came, they played as support for Thin Lizzy. Slane is also significant for the band because it was where they recorded The Unforgettable Fire in 1984. "This gig is really important to U2 in so many ways," McGuinness says enthusiastically. "There have been concerts happening here since 1981, and U2 performed at the first one. Since that time the Rolling Stones, Bob Dylan, Bruce Springsteen and all the greats have performed here. This is a great year for U2 to do it."

It's been a "great year" for U2 on several fronts. After a couple of albums which didn't sell as well as expected, and embarrassing difficulties with the Popmart tour a few years ago, U2's current album, All That You Can't Leave Behind, is selling by the bucketload, and the Elevation 2001 Tour is on course to become one of the biggest ever. With more than 2m ticket sales, Elevation 2001 is expected to gross around Dollars 123m.

The money is certainly rolling in. However, it is almost impossible to work out how much the band and McGuinness, who, like each member, is said to take a 20 per cent share of earnings, are actually pocketing. Revenues are funnelled through an impenetrable maze of interconnected companies. Newspapers make regular attempts to estimate U2's wealth -- the News of the
World this year estimated that the five were worth Pounds 475m between them -- but McGuinness says that all the figures he reads are wrong. Indeed, when in 1995 an Irish finance magazine estimated the band's earnings at more than Dollars 300m, McGuinness is said to have torn out the article, scribbled "bollocks" on it, and sent it back to the magazine.

But one thing we know for sure is that the manager and his company, Principle Management, which has offices in Dublin and New York, is at the very centre of the operation. McGuinness himself has been regarded as the fifth member of U2 ever since he agreed to manage the band in 1978. While countless other rock acts of U2's generation have faded, died, or split with their management, U2 still have their original line-up and manager.

"The relationship between the five of us has changed enormously over the last 24 years," he says. "We are still good friends, we have had enormous success together and we have a lot of mutual respect, but the key is that we know how to stay out of each other's way as well as how to be together. Everybody needs their own space and needs to learn from their own mistakes.

"It's also important that the band themselves are extremely involved in the business side of things -- they have been in the music industry for as long as I have, and they understand that it would be pathetic to be good at the music and bad at business. We take decisions together. Sometimes we make our decisions painfully slowly because everyone is involved, but it is important to find consensus and agreement on all the issues. We sit around a table, and we talk things through until we have consensus."

U2's unique high-royalty contract with Island Records, which was once an indie label but is now part of Universal Music, a subsidiary of Vivendi Universal, has also, undoubtedly, been a factor in keeping the band together. The band's royalty rate on record sales -- rumoured to be as high as 28 per cent -- means that U2 are one of highest-earning acts in pop history.

Indeed, the record deal is probably U2's most notable business achievement. Their move to secure a 10 per cent equity stake in Island instead of taking earnings on The Joshua Tree in cash, was inspired. It gave the band around Dollars 20m when the company was bought by PolyGram in 1989. Around the same time they also struck a deal to get back the copyright on
their material. This means that unlike most acts, U2 own all their songs.

McGuinness is clearly satisfied with the current state of play. "We have only ever had one record deal with Island Records, though it has changed quite dramatically over time. At the beginning it was a conventional record deal, with low royalties and low advances and the record company owned the masters. All those aspects of it have changed. The royalty rates and
advances are high, and some time after the record deal, ownership of all U2's recordings reverts to the four members of the band. That's pretty unusual, but it has taken many years. I am very proud the band was able to achieve that. People sometimes think that record companies push artists around all the time, but if anything, with U2 it's the other way round."

But the band have had their fair share of wobbles in recent years. Their last album, Pop, was released to a lukewarm reaction and failed to replicate the success of their preceding mainstream albums -- selling around 7m compared to The Joshua Tree's 17m. McGuinness has said that anything below 10m is disappointing for U2. The subsequent Popmart tour was plagued by problems and suffered bad publicity about sluggish ticket sales.

McGuinness, who still goes to every U2 gig and is involved in a debriefing with the band after each show, admits that things went awry. "I think the band would say that Pop wasn't finished creatively. An album with the slightly provocative name of Pop has to have perfectly finished pop singles. I think we curtailed the process slightly because we were ready to tour and we let the tour and the album bang into each other. Too much was committed and we ran out of time. Also, there were executive changes taking place at Island at the time that didn't help us.

"Then the Popmart tour suffered from poor financial controls, or, if you like, too much enthusiasm. We would sometimes have a great idea and proceed to execute it without necessarily budgeting it or seeing what the downside might be. We made perfectly good money in North America and Europe but we then overspent by taking the whole show to Japan, South Africa, Australia and South America. All those Southern Hemisphere territories lost money."

Around the same time, McGuinness had a bitter falling out with the accountant Ossie Kilkenney, who had worked with the band for more than 10 years. McGuinness's mood turns at the mere mention of the name, and he refuses to discuss what happened. "I don't know what to say about Ossie," he says after a long pause. "My mother used to say, if you can't think of anything good to say about a person, say nothing at all and I think I'll take her advice. It was certainly a very big falling out."

Together with the promoter SFX, part of the Nasdaq-listed Clear Channel Communications, Guinness and the band have planned the Elevation tour to ensure that it doesn't repeat any of Popmart's mistakes. McGuinness's new financial man -- Trevor Bowen, a former senior partner at KPMG -- was asked to produce detailed projections and budgets and ran financial exercises on how much different kinds of tours might cost.

Although the decision to do an arena tour, rather than U2's usual stadium shows, was a creative one made by the band, McGuinness indicates that the resulting publicity about gigs selling out in minutes has helped boost the band's image. "We have been playing outdoor since 1987 and it has been very fulfilling in a gladiatorial way, but it has been exciting to take the energy of those huge places indoors, to what we blithely refer to as the small places -- the 20,000-seaters. In a way, it is good not to supply demand. We want to sell out every venue that we play and leave that town or country with people thinking, oh, we couldn't get into that show, that band are still hot."

Rob Partridge, who worked with McGuinness and U2 between 1977 and 1990, as media director at Island Records, says that touring has always been a key element of McGuinness's strategy. "U2 toured relentlessly across the US in the early days -- and not just the east and west coasts but the Midwest as well. They did it for so long that the American audience started to see U2 as an American band."

McGuinness says he doesn't understand why more new bands don't tour the US in an aggressive way. "It's terrible that people now accept that it's pretty much impossible for UK acts to break into America. It's a consequence of financial pressure to achieve quick results, and a certain lack of effort and energy on the part of the artists. I find it extraordinary when I meet young English bands who say they've just done an American tour, and it turns out that they have only done 12 shows. The American audience is there for the taking, but you have to spend a lot of time working there."

Like the band, McGuinness also seems to have gone through a back-to-basics process this year. Although he's had some success with numerous non-U2 ventures, such as jointly owning the company that publishes the Riverdance music and being one of the founding partners in TV3, the Irish independent TV channel, several of his side projects, including an investment in LeisureCorp and the setting up of a record company called Mother, have floundered.

"Ultimately, Mother Records didn't succeed, although we came close a couple of times with a group called the Longpigs. Quite frankly, I prefer being in the management business to the record business. Ultimately I prefer what I'm doing now. I'm very happy being known as U2's manager."

Nevertheless, McGuinness still has a few non-U2 projects in the pipeline. He has teamed up with Michael Colgan, the director of the Gate Theatre in Dublin, to make a film based on Julie Parsons' book Mary, Mary, and he also manages the British singer PJ Harvey and the Dublin singer-songwriter Paddy Casey. McGuinness says that Principle Management remains open to new acts.

"I do get asked to manage a lot of other artists -- sometimes it's an approach from a record company who are unhappy with the management that a major artist has at the moment. They will come to me very discreetly sometimes and say, if we succeed in dislodging x, would you be interested in managing artist y? It's not an approach I particularly like receiving, but everybody's got my number."

It is a sign of McGuinness's ambition for the band that he is incredibly annoyed that U2's US label released an album by Jay-Z in the same week as All That You Can't Leave Behind. "It was extremely annoying that this record did not go to number one in the US -- it was particularly annoying that it was dislodged by another artist from the same company. What Universal seem to need is an air-traffic controller."

But he remains upbeat about the album's prospects. "My guess is that this record is going to be bigger than The Joshua Tree in the fullness of time. The Joshua Tree is up to about 17m sales now, but it was released in 1987. We are having a very big hit at the moment in the US with a single from the current album and we are now over 9m sales worldwide. I think this record will sell very strongly into next year.

"At that point, other factors take over: we will certainly be a candidate for album of the year at the Grammys and we have a tour special being screened around the world in autumn. There will also be a live DVD in the shops before Christmas, so there'll be a lot of U2 visibility.

"The key is to achieve a new and younger audience with each record. It's nice that the older audience is still interested in U2, but the more important part of the audience is definitely the new ones. And the reality is that U2 are doing their finest work now -- I see no sign of them stopping. If they run out of steam creatively, that would be the time to think about stopping, for them and maybe for me as well. But why would they stop?"