I'm a UK employer of developers based in central London and I let people work from home. Almost all do so every now and then (we allow 15 days a year automatically and always add more if asked). Some work from home on a regular or semi-regular basis 1 or 2 days a week. I have had one person move to Hong Kong for 4 years and one move to Mexico City for 18 months. Both are now back in the UK and both are working as hard as ever and delivering great work.
The problem is less about working from home, more about finding the right people with the right skills. It's not just development skills (I'm looking for Progress and Python coders currently) but it's also the ability to communicate remotely, to pick up the nuances of meetings remotely and to have the self-motivation. A lot of the work is pretty boring (we're contract developers rather than a trendy web shop or start-up) and so it is easy to not communicate and not pick up the vibe. Don't expect to just not show up at the office one day and for everything to be fine. Some of our team work from home for a day and we just don't hear from them or even know that they exist. Don't let yourself be one of them! Be prepared to put in the days in the office when you start - otherwise people just won't know who you are.