That was the original logic, which has gone out of the window more recently.
EGU. and onwards (and a few others) were military, same concept.
Then EGE. was used for the Scottie airfields (later on).
Then EGSY, which ought to be near Stansted (EGSS) was allocated to Sheffield and the whole system went awry.
Some joint civil/mil fields had two locator codes (eg Manston was EGUM for Mil, and is still EGMH for civil).
The French system is very similar - LFP. is Paris, LFO. the North West of France, LFB. Bordeaux area, etc.
Belgium, the Netherlands, and several others didn't bother with all that. EBOS is Ostend, EHAM is Amsterdam, ELLX Luxemburg, and so on.
The things I do on long dark nights...