SECURITY services are said to be hunting a cell of the Al-Qaida terrorist group which could be preparing to strike in the North of England.

Weekend reports, attributed to "security sources", suggest that groups of up to ten terrorists originally from north Africa and Saudi Arabia, some British citizens, have carried out "dummy runs" in preparation for a bombing strike.

Vulnerable targets are said to include commercial targets, such as big banks or shopping centres.

One of the cells being hunted is said to be in the Midlands and the other in the North.

The warnings are understood to have been given to ministers by Eliza Manningham-Buller, the director-general of MI5. She is reported to have told the parliamentary intelligence and security committee that Al-Qaida "sleepers" have conducted surveillance of potential targets.

The would-be terrorists are believed to be difficult to find, as they are deeply entrenched in the Muslim community.

The reported disclosure came after Home Secretary David Blunkett admitted for the first time that attempts to carry out violent attacks against British targets had been foiled.

He said the counter-terrorist operations of the security services were working all the time to prevent any attack.

Last week, Metropolitan Police Commissioner Sir John Stevens, the former Northumbria Police Chief Constable, confirmed Britain was on the highest state of alert since the September 11 attacks in New York and Washington, in 2001.

It was based on information received 11 days ago, warning of an imminent attack.