Hi Jonny,
If I am understanding your question correctly, you have two concerns:
1. Linking from your subdomains to your main domain
2. Creating micro sites which link back to your main domain
Regarding linking from your subdomain site to your main domain (i.e. from london.site.co.uk to www.site.co.uk/london) I am not aware of any issue Google may have with that process. Even though technically a subdomain is a different site, Google is clearly aware you own and operate both sites and would not provide external linking value to such links. In other words, I would not expect that type of link to be used to manipulative search rankings.
With the above understood, I would suggest the process is inefficient. It is likely your best course of action would be to eliminate the subdomains and simply use the content on your main site.
Regarding the micro sites, that is a concern. Your approach is highly likely to be considered as Doorway Pages. Based on your description, it seems like a textbook case. http://support.google.com/webmasters/bin/answer.py?hl=en&answer=2721311