One man, understood to have been located in Northern Ireland, is believed to have been identified after the former owners of the vehicles used in both attacks, the biggest explosions detonated on the mainland, were traced.
Senior detectives believe that a unit of two or three IRA members was ordered to carry out a 'one- off spectacular' timed for the day after the general election.
The group is believed to have been on the British mainland for only a few days, during which it planned and executed the attacks and left within hours.
Senior counter-terrorism sources at Scotland Yard said yesterday that they were liaising with their counterparts in Northern Ireland to bring the man to justice. It is also believed that other suspects have been identified but not yet located. One source said: 'We have made a breakthrough.'
The City of London bomb, which killed three people and injured 91, destroyed the Baltic Exchange and severely damaged surrounding buildings. Three hours later, a similar sized bomb exploded at the junction of the M1 and the North Circular Road at Staples Corner in north London, causing much damage but no injuries. Both bombs were placed in vans and were home-made rather than Semtex; each weighed several hundred pounds.
Both of the vehicles used were bought with cash on the day before general election day. The Staples Corner bomb was placed in a white Bedford van, which had changed hands seven times in ten days, while the City bomb was in a white Ford Transit. Police have interviewed the last owners of both vehicles.
Police are convinced that the same people carried out both explosions because of similarities in the voice of the man who made the two warning calls, which used a recognised code word.
The determination of the IRA to carry out what are now termed 'spectaculars' became apparent with the mortar bomb attacks on Downing Street in February last year. The IRA units briefed for these high-profile, carefully timed and quickly executed attacks function independently of more longer-term operations and leave less trace of their movements.
Yesterday, inquests were held on the three victims of the City explosion: Danielle Carter, 15, Paul Butt, 29, and Thomas Casey, 49. The City of London coroner, Dr David Paul, directed the jury to return a verdict of unlawful killing.
It was also disclosed yesterday that more than 20 of the recent bomb warnings that have caused severe transport disruption in London are believed to have been by the IRA in an attempt to paralyse the city and increase public alarm. In each case the recognised code word was used.