Few outsiders took much notice of the bookshop whose shabby frontage and fading paint blended seamlessly into the rundown Leeds suburb.

They were not to know that behind its door lay an incubating chamber breeding believers in a virulent jihadist ideology that one day would bring mass murder to London.

The shop on Beeston Hill was called Iqra, Arabic for “recite”. It was the first word of the Koran as revealed to the Prophet.

When the shop was opened in 2000 by “a dedicated core of brothers and sisters who have taken it upon themselves to propagate the message of Islam”, Iqra was welcomed by many local Muslims. Too many of their children were going astray, lured by the corrupting decadence – alcohol, drugs, clubs, sex – of Western society and alienated from their parents’ customs and values.

Their family roots may have lain in the Mirpur region of Kashmir, in Sylhet, the tea capital of Bangladesh, or in rural Punjab, Pakistan, but they had Yorkshire accents. The mosque’s recently imported imam, communicating solely in Urdu, could not connect with their lives.

So when a group of bright young Beeston Muslims, some of them youth workers, decided to open Iqra – with its English books, DVDs and classes – it was hoped that a lost generation might be returned to the fold. The bookshop did turn some away from drugs and petty crime. Yet its main players had no intention of steering young minds towards the “folk Islam” that their parents had carried from South Asia.

The six trustees of Iqra, listed on a declaration form sent to the Charity Commission in 2002, included Mohammad Sidique Khan, who in 2005 would be the leader of the July 7 suicide bombers. Also named were Khalid Khaliq, jailed last year for a terrorism offence, and Sadeer Saleem and Waheed Ali, two of the three men cleared yesterday of helping to plan the July 7 mission.

Shehzad Tanweer, whose suicide rucksack would kill seven people at Aldgate, was one of four names subsequently added to the list of trustees. Hasib Hussain, the future bus bomber, and Mohammed Shakil, who was also cleared yesterday of any involvement in the July 7 plot, were regular visitors.

These were young men in search of an identity, feeling not quite Pakistani but also not quite British. Iqra and a like-minded circle of friends offered that sense of belonging. The charity offered membership of a global brotherhood of true believers that held both the older generation’s Hindu-influenced Barelwi Islam – Sufi pirs (masters), music and festivals – and liberal democracy in equal contempt.

After rejecting the Hardy Street mosque used by their parents, the group moved initially to the Deobandi mosque on Stratford Street whose literal interpretation of the faith was far more in tune with their new-found beliefs. But even that would eventually prove inadequate because political discussions were discouraged.

Iqra was not just a bookshop. Over three floors, its back rooms included an internet suite, a prayer room, an office and a digital video-editing suite.

Every room breathed the Salafi jihadist creed. It was shouted by the radical websites, argued in the literature and proclaimed in the store’s collection of graphic videos and DVDs. That it was every Muslim’s duty to wage jihad was as unquestionable as the certainty that martyrdom was an honour to be sought. The group dynamic, the hiking and climbing trips, potholing and white-water rafting, tightened the bonds.

And all the while, well-intentioned public bodies were throwing money at the Iqra gang, whose projects included a school, a youth access venue and a gym. Grants totalling hundreds of thousands of pounds were made by the regional development agency Yorkshire Forward and the local council, churches and charities.

Martin Gilbertson, an IT consultant, worked at Iqra for two years and innocently helped the charity to become increasingly sophisticated in its use of secure computer systems.

He left in 2004 and says that he tried to warn the police of the danger brewing, but was not interviewed by counter-terrorism detectives until 52 innocent people had been murdered in London. Mr Gilbertson told The Timesthat he had become sickened by the febrile atmosphere and the “racist rhetoric” about filthy kafirs (unbelievers), Jews and America and Britain.

He knows how an apparently humanitarian anti-war message can mutate into a jihadist call to arms because he unwittingly helped Iqra to produce propaganda videos for mass distribution at Stop the War marches.

It was a seductive message. Khan, Tanweer, Hussain, Ali and Shakil would all make their way to jihadist training camps in Pakistan. Khan, Tanweer and Hussain achieved the martyrdom that they craved by executing the most devastating terrorist attack ever visited on mainland Britain. Ali, Shakil and Sadeer Saleem had no knowledge of the plot to bomb London.

And so life in Beeston continues. Mr Gilbertson says that not once inside Iqra did he hear a Muslim voice raised to challenge the prevailing orthodoxy. Police have voiced frustration at the lack of cooperation they have received from certain people in Beeston who are, they believe, withholding vital information about the terror gang.

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