Why are the salaries so much lower than in the States? I know part of it is that demand outstrips supply here, so perhaps my question resolves to why there is less demand. I assume that the point of software is that it can be an efficiency multiplier, so if you hire someone to automate a process, that is either reducing costs or increasing revenue, which should be fundamentally valuable.
I am deeply ignorant here and will gladly learn from relevant links or responses.
I think perhaps you're looking at this backwards: it's not that salaries in London are much lower than the US, it's that salaries in certain specific parts of the US that get mentioned a lot on HN are much higher than just about anywhere else in the world.
As for how this happens, I'd say it's a combination of two things. Firstly, salaries in the software industry are mostly determined by market forces rather than actual value generated, because there isn't any driving force, union-based or otherwise, to give individual developers leverage to set rates based on value instead. Secondly, incompetent middle management is a speciality here in the UK, and a lot of the people responsible for hiring software guys wouldn't know a good developer if he single-handedly displaced Google in his spare time. Therefore many businesses that need software wind up hiring poor developers and then complaining about the results.
I concluded after a while that the solution to this problem almost always involves founding your own company, even if it's just a vehicle for freelance contracting. That way you are negotiating with clients on a business-to-business basis and typically dealing with senior managers who have a real problem to solve and will pay for the actual value they get if you can solve it for them, bypassing all the PHBs in middle management and their foot soldiers in HR, accounting, legal, etc.
Outside of finance most profitable businesses do not have a culture of paying out those profits to the workforce, they pay management a lot and everyone else as little as they can. And don't forget that most businesses are not very profitable anyway. Europe has very few large profitable internet businesses, and not many small ones either. Bootstrapped businesses like to invest in growth not salaries. Many non startup businesses have low productivity.
London also has a large supply of people coming from other countries as the job market is much better here, and these people will often accept fairly low pay as it is higher than what they would have got at home.
When I worked for a large multi-national (quite a few years ago) I brought some software engineers working out of one of our UK offices onto our team because of some collaboration initiative. I was surprised not only at how much lower their salary was than in the U.S. (I was in Palo Alto, CA at the time) but how much shit they put up with that software engineers in the US would say "fuck off" to, hoops they had to jump through to advance, wearing neckties, yes sir, no sir, three bags full sir, etc. It felt like being in high school or something. I felt bad for them, and they were good engineers.
They're not lower than in the States, they are lower than the bay area, which is a very, very small bit of the States. Also, it's dominated by a particular kind of business (VC funded startups) that have the cash and mandate to spend a lot of money on engineering salaries. These are not too common outside the bay area, and certainly not as concentrated anywhere.
I'm not sure how the relative geographical size of the Bay Area is relevant here. In terms of programming jobs, the Bay Area is a very significant part of the US.
In any case, this and other polls indicate that programmer salaries in London are also lower than in many other large American metropolitan areas, not only SV. I did a quick search on Indeed for software engineer salaries in several American cities (NYC, Seattle, Chicago, Boston, Houston, Austin, Portland, Miami, whatever came to my mind) and in all of them the average salary is over U$85k. In fact I also searched for junior software engineer and in all of them it's at least U$60k, still within the £40~45k range which is the mode of the poll (and presumably filled with mostly non-junior developers).
If you look at average programming salaries in Tokyo or Paris you'll see a similar thing. The interesting question is not why London salaries are "low", but how come American salaries are so high.
Actually I would say that they are lower that in the U.S. Again it depends on where in the U.S. you're talking about but I would say that £40 is entry level, £50K is for a intermediate level £70K for senior and £100K is pretty much the max before you hit management.
I would say that salaries like this are pretty much on par with most major metro areas in the U.S. (not just silicon valley)
The level of sheer incompetence in management of European software companies is pretty staggering if you're used to Silicon Valley standards; it's common to hire programmers who have no idea how to write a program, use completely obsolete tools, have no clue about design or process and little clue about marketing etc.
The result is that companies don't actually make a huge amount of money from each programmer so they often genuinely can't afford to pay good salaries.
On the bright side, if you are a competent manager or willing to learn to be one, and willing to either stomach European employment legislation or hire remotely, you could treat our continent as a bounty of little-used resources.
Some suggestions. Don't know how true this is in UK but comparing US to scandinavia i think these factors weight in some bit.
Education is cheap so there are less student loans to pay back and more people get a degree saturating the market. Having a degree simply isn't that special.
Healthcare and other public services are cheap, you don't have to pay expensive health insurances which lowers the salary level for everybody, not only engineers.
I am deeply ignorant here and will gladly learn from relevant links or responses.