Compared to Eastern Europe and Southern Europe, yes. But if you compare London against Germany or any of the northern siblings (Scandinavia region for instance), London is very cheap.
If cost of living is your highest priority, then cities in Czechoslovakia, Hungary, Italy and Spain (in that order) will be your favourite. But then that's just not what a startup needs, doesn't it? In case of software, London has the best ecosystem. London is also not bad for lifestyle, etc ...
In my experience, London is more expensive than just about anywhere in the world. If you need cheap, my recommendation is Berlin, housing and office costs are very low, and if you are coming from anywhere else in Europe almost everyone speaks English which is quite handy
Try living in Tokyo and Scandinavian cities :) I am currently living in Finland and just finished a small tour of the Scandinavian region. The costs here compared to London are not comparable. Other then rent, everything else is way out expensive compared to London. But if you are ready to travel a bit daily you can offset that rent cost. But then you cannot beat the rest of environment. For e.g. number of fellow hackers / programmers, etc ...
True. I also know a few who have relocated from Budapest (Hungary) to Prague (Czech R) after completing university. More jobs, better wage, better living standards.
Slovakia has improved a lot lately.
Some thing which I didn't expect before visiting Slovakia, was the lack of English skills among youth. They seemed to speak better German than English.