There are any number of subjects that a novelist can take on  two people falling in love in Sussex, a race against time to foil a bomb plot, the entry into politics of a Victorian transvestite. But surely only a writer very confident of her powers decides to write a novel about the end of the world. Margaret Atwood clearly is that novelist and The Year of the Flood is, for the most part, the work of a marvellously confident and intricate imagination. When the brilliant performance starts to fall apart, as it does towards the end, we can only reflect that here is a subject that would defeat almost any novelist.

The Year of the Flood is a sort of loose sequel to Atwood's 2003 Oryx and Crake. She seems, I think, to have relaxed into her future of biological inventions, the grotesque backdrop made up of wilful scientific manipulation of organic materials. The drama plays out with a much ampler sense of its own world. Far in the future, states have collapsed; authority is wielded by immense corporations and their security forces. The rich live within exquisite gated communities, guarded by the CorpSeCorps militia. The rest  pleebrats  live outside in slums.

So far, so Wellsian; these dystopias have always depended on variations on the Morlocks and the Eloi. The setting here is richly exotic. Science can do more or less anything and biliously coloured engineered sheep share meadows with luminous green rabbits and the bleating roar of a sheep-lion hybrid. The wealthy depend on massive intakes of chemicals, the poor on hideous burgers that may contain bits of mouse, cat and worse  a corpse doesn't hang around long in the pleebrat badlands if the management of SecretBurgers notices.

Atwood's interest is in neither pole of pampered luxury or suffering poverty, but in something that arises in the overlapping areas of discontent of both rich and poor. There is a seething mass of gangs and religious/mystical groups, all vying for attention and claiming some kind of power and authority  "the Known Fruits, the Petrobaptiststhe Lion Isaiahists and the Wolf Isaiahists the pleebrat gangs, the brown Tex-Mexes, the pallid Lintheads"

Out of these arise God's Gardeners, whose leader, Adam One, is surrounded by other renamed Adams and Eves on the miniature synod. They are fundamentalist vegetarians and ecologists and Atwood catches the tone of the religious vegetarian with ungenerously funny accuracy. "Thanks to Rebecca, our Eve Eleven, for her innovative zucchini and radish dessert slice. We are certainly looking forward to it."

Adam One is predicting the imminent end of the world with great confidence and he happens to be right. One member, Ren, flees from the group to more worldly matters and is first seen in the locked back room of a grotesque strip club where the women are coated in fish scales. Toby (a woman) flees to it from an oppressive life in SecretBurgers and a murderous male lover of the sort Atwood likes so much. Once the catastrophe has happened, these two are among the few people left alive and the book traces their different stories and final coming together.

Like all dystopias, this is a satire on present-day life. Atwood casts her net wide and selects her targets broadly. The proposal that the future will continue to turn punishment of criminals into a television spectacle is not an original one, but I enjoyed Atwood's Painball, and rather wanted her to have more fun with it. The strip clubs, oppressive labour of the female proletariat coupled with pampered and plastic-surgery-addicted wives have been distinctive Atwood-dystopia territory since The Handmaid's Tale at least, and it gains an added dimension from the biologically manipulative fantasy which she started to explore in Oryx and Crake. Here, memorably and inexplicably, hair extensions look rather good but smell, we are told, of mutton, a price thought to be worth paying.

It's an enjoyable, densely furnished book, but in the end Atwood's preferred technique limits the impact of the story. She always prefers to send a protagonist through the world she creates, recording her impressions. Here, this limits the impact of the great catastrophe, much led up to but only glimpsed on the telly by one character. (What JG Ballard would have done with it.) And the last chapters collapse into a truly ludicrous welter of coincidence, as the only people left alive turn out to know each other and happen to be in the same forest clearing at the same time.

Never mind. Margaret Atwood does fantastically elaborate doom and gloom better than almost anyone, supplying us with things to worry about that we had never previously considered and, better, deeper, more pensive jokes than we ever imagined. "This is Irony," thinks Ren. "I'd learned about Irony [at college] in Dance Theatrics." The Year of the Flood is a book which, along with its dense, readerly pleasures, invites an argument.

 Philip Hensher's most recent novel is The Northern Clemency (HarperPerennial)

Atwood live in London  with friends

The Year of the Flood St James's, Piccadilly, London

Literary audiences are a forgiving lot, nodding and chortling on cue, embracing eccentricity. So it's fair to say Margaret Atwood had the crowd on her side last week for the London leg of her book tour, which took place in St James's Church, Piccadilly. Nor would any of them have quibbled with Atwood's message: for her "green" book tour she is travelling by train and donating proceeds to the RSPB, while attempting to breathe new life into the traditional book event by semi-dramatising her reading and adding songs.

So judgment was reserved when Atwood appeared at the back of the church with five cohorts and sort of slow-jigged down the aisle carrying a glowing blue ball. Patience was maintained as the onstage choir, dressed like Blake's 7 extras, joylessly made their way through tuneless climate-change hymns. Then Roger Lloyd Pack and Diana Quick started acting out the roles of her book's heroes, all plummy vowels and enunciation, draining Atwood's gorgeous sentences of emotion. Atwood herself sat to the side, serenely and queenly, interjecting only occasionally.

The final straw, however, was the chanting and clapping: actors and author in a line front of stage, looking both lost and demented. Her audience were silenced, bemused. Some giggled nervously, and devotees were left wondering when Atwood tipped from endearingly eccentric to exasperatingly barking. Nicola Barr

To my mind, The Handmaid's Tale, Oryx and Crake and now The Year of the Flood all exemplify one of the things science fiction does, which is to extrapolate imaginatively from current trends and events to a near-future that's half prediction, half satire. But Margaret Atwood doesn't want any of her books to be called science fiction. In her recent, brilliant essay collection, Moving Targets, she says that everything that happens in her novels is possible and may even have already happened, so they can't be science fiction, which is "fiction in which things happen that are not possible today". This arbitrarily restrictive definition seems designed to protect her novels from being relegated to a genre still shunned by hidebound readers, reviewers and prize-awarders. She doesn't want the literary bigots to shove her into the literary ghetto.

Who can blame her? I feel obliged to respect her wish, although it forces me, too, into a false position. I could talk about her new book more freely, more truly, if I could talk about it as what it is, using the lively vocabulary of modern science-fiction criticism, giving it the praise it deserves as a work of unusual cautionary imagination and satirical invention. As it is, I must restrict myself to the vocabulary and expectations suitable to a realistic novel, even if forced by those limitations into a less favourable stance.

So, then, the novel begins in Year 25, the Year of the Flood, without explanation of what era it is the 25th year of, and for a while without explanation of the word "Flood". We will gather that it was a Dry Flood, and that the term refers to the extinction of - apparently - all but a very few members of the human species by a nameless epidemic. The nature and symptoms of the disease, aside from coughing, are undescribed. One needs no description of such events when they are part of history or the reader's experience; a reference to "the Black Plague" or "the swine flu" is enough. But here, failure to describe the nature of the illness and the days of its worst virulence leaves the epidemic an abstraction, novelistically weightless. Perhaps on the principle that since everything in her novel is possible and may have already happened so the reader is familiar with it, the author doles out useful information sparingly. I sometimes felt that I was undergoing, and failing, a test of my cleverness at guessing from hints, reading between lines and recognising allusions to an earlier novel.

The Year of the Flood is a continuation of, not exactly a sequel to, Oryx and Crake. Several characters from the earlier book appear, along with such institutions as God's Gardeners and the Corporations. The Gardeners, an eco-religious sect, farm rooftops, which can be defended from the gangs and marauders who infest the streets, and try to follow a way of harmony with nature through the breakdown of civilisation. Presented with irony and affection, the Gardeners are a vividly memorable invention. As for the Corporations, these are not the dear familiar corporations that now control our governments in a more or less surreptitious fashion. In the novel, no national governments appear to be functioning. The setting may be the upper Midwest of the US or Canada, but there is no geography, no history. The Corporations, and particularly their security arm CorpSeCorps, are in total control. As in the earlier book, all science and technology is Corporation-owned, in the service of furthering capitalist growth and keeping the populace unrevolutionary, while destroying the resources and ecological balances of the planet at an ever-increasing rate. Genetic manipulation has been busy producing useless or noxious monsters such as green rabbits, rakunks, and partly rational pigs.

You can see that the world of the Year 25 is not an improvement on the world of that other great realistic novel, Nineteen Eighty-Four. It is, if possible, even more depressing, most of humanity being dead and the few survivors scrabbling out an evidently hopeless existence. Not even Beckett could make a scene so bleak endurable for several hundred pages. Much of the novel takes place in flashbacks to as early as the Year Five, when things were bad, but not that bad, yet. And the story finds its vitality in the characters through whose eyes we see these scenes. Probably what I will remember from the book in a year's time will not be its grim events, but the two women, Toby and Ren.

One of the features supposed to distinguish "popular" from "literary" fiction is the nature of the characters who enact the fiction. In a realistic novel we expect to find individual personalities of some complexity; in a western, mystery, romance or spy thriller, we accept or welcome conventional types, even stock figures - the Cowboy, the Feisty Heroine, the Dark Brooding Landowner. We may, of course, in any one example, get the reverse of what we expect. The supposed distinction is so often violated in both directions as to be nearly meaningless. But there is one kind of fiction where complex, unpredictable individuality is really very rare. That is satire, and satire is one of Atwood's strongest veins.

The personality and feelings of characters in Oryx and Crake were of little interest; these were figures in the service of a morality play. The Year of the Flood is less satirical in tone, less of an intellectual exercise, less scathing though more painful. It is seen very largely through the eyes of women, powerless women, whose individual characters and temperaments and emotions are vivid and memorable. We have less of Hogarth and more of Goya.

Affection and loyalty are strongly felt; loving relationships between characters are memorable. Such loyalties are affirmed, of course, against all the odds, and like everything Toby, Ren, Amanda, the Gardeners are and do, will soon end in the brute failure of all human intentions. Yet such loyalties spring up, like the shoots of March. In this tiny green featherweight in the scales of Doom we persist in seeing a vast, irrational hope. And somewhere here, somewhere in this irrational affirmation, I think, lies hidden the heart of the novel.

That is why the hymns of the Gardeners, which are printed about every third chapter along with sermon-meditations, may be read as kindly spoofs of hippy mysticism, green fervour, and religious naivety, and at the same time can be taken quite seriously. Their hymnbook rhythms and Blakean dodges are appropriate to their sentiments, which aren't as simple as they might seem at first sight:

"But Man alone seeks Vengefulness,
And writes his abstract Laws on stone;
For this false Justice he has made,
He tortures limb and crushes bone.
Is this the image of a god?
My tooth for yours, your eye for mine?
Oh, if Revenge did move the stars
Instead of Love, they would not shine."

In an endnote, Atwood invites us to hear the Gardeners' hymns sung on her websites and to use them "for amateur devotional or environmental purposes". This seems to indicate that she means what they say.

But any affirmation by this author will be hedged with all the barbed wire, flaming swords and red-eyed rottweilers she can summon. Much of the story is violent and cruel. None of the male characters is developed at all; they play their roles, no more. The women are real people, but heartbreaking ones. Ren's chapters are a litany of a gentle soul enduring endless degradation with endless patience. Toby's nature is tougher, but she is tried to the limit and beyond. Perhaps the book is not an affirmation at all, only a lament, a lament for what little was good about human beings - affection, loyalty, patience, courage - ground down into the dust by our overweening stupidity and monkey cleverness and crazy hatefulness.

It is no comfort to find that some of the genetic experiments are humanoids designed to replace humanity. Who wants to be replaced by people who turn blue when they want sex, so that the men's enormous genitals are blue all the time? Who wants to believe that a story in which that happens isn't science fiction?

I found the final sentences of the book unexpected, not the seemingly inevitable brutal end or dying fall, nor yet a deus-ex-machina salvation, but a surprise, a mystery. Who are the people coming with torches, singing? You must read this extraordinary novel and decide for yourself.

 Ursula K Le Guin's novel Lavinia is published by Gollancz.