Over the course of the First World War poison gas had been employed on the battlefield; aeroplanes had progressed from barely carrying their crew at the start of the conflict to a ton of bombs and more at the end of it; Zeppelins and heavy Gotha bombers had bombed London. It didn't require too much extrapolation to predict the impact of ever larger fleets of faster, heavier bombers unleashing explosive, incendiary and poison gas bombs on cities, aerial bombing being a theme of inter-war Future War novels such as Neil Bell's 1931 The Gas War of 1940, HG Wells' 1933 The Shape of Things to Come, and S. Fowler Wright's 1936 Four Days' War. The fear of a "knock-out blow", a massive, rapid, devastating attack from the air that could not be defended, with poison gas a frequent element, was hardly limited to fiction. As Brett Holman notes in The Next War in the Air "...indeed, there was little difference in content and, to an extent, style between knock-out blow scenarios in fiction and non-fiction". The military theorist Giulio Douhet followed his Command of the Air of 1921, one of they key works on air power, with an illustrative novel, The War of 19--, in 1930 envisaging a war between Germany and France and Belgium that effectively lasts a single day as German bombers obliterate Franco-Belgian air forces and cities.

Specific examples of London coming under gas attack can be found in, for example, JFC Fulller's The Reformation of War from 1923: "I believe that, in future warfare, great cities, such as London, will be attacked from the air, and that a fleet of 500 aeroplanes each carrying 500 ten-pound bombs of, let us suppose, mustard gas, might cause 200,000 minor casualties and throw the whole city into panic within half an hour of their arrival. Picture, if you can, what the result will be : London for several days will be one vast raving Bedlam, the hospitals will be stormed, traffic will cease, the homeless will shriek for help, the city will be in pandemonium. What of the government at Westminster ? It will be swept away by an avalanche of terror."

And a House of Commons debate of July 1927: "Our cities will be not merely decimated but rendered utterly uninhabitable by chemical bombs. [...] ...there is little doubt the belligerents will resort to gas bomb attacks on a vast scale. This form of attack upon great cities such as London or Paris can entail the loss of millions of lives in the course of a few hours. The gas bombs employed will contain gas in a liquid form. The liquid would be released on impact and expand to many hundred times its volume. The gas cloud so formed would be heavier than air, and would thus go into the cellars and tubes in which the population had taken refuge. As the bombardment continued the gas would thicken until it flowed through the streets of the city in rivers. All gas experts are agreed that is would be impossible to devise means to protect the civil population from this form of attack".

One of the more extreme predictions was Lord Halsbury in 1933, forecasting "a single gas bomb, if dropped on Piccadilly Circus, would kill everybody in an area from Regent’s Park to the Thames". This was, of course, a massive overstatement, and articles and speeches presented counterarguments (one resulting in the headline "Bullets Better Than Gas For Wiping Out London Says Practical Colonel"), but the fear of poison gas attack was widespread (in 1938 the Air Raid Precautions Department assumed that attacks would consist of 50% high explosive bombs, 25% incendiaries, and 25% gas), hence the massive manufacture and distribution of gas masks.

As to why gas was not actually used for air bombardments, that's a trickier question, but concerns over international opinion, the assurance of retaliatory strikes (and lack of hard intelligence over actual capabilities), and misgivings of senior officers and politicians who may themselves have experienced gas warfare in the First World War played a part.

See the always excellent /u/Georgy_K_Zhukov 's answer on post-1925 chemical warfare for a wider look at chemical warfare; specifically for Britain's fears Brett Holman's The Next War in the Air: Britain's Fear of the Bomber, 1908-1941 is excellent and Robert Mackay's Half the Battle: Civilian morale in Britain during the Second World War has a good section on War Imagined as well as War Experienced. Most specifically on gas, there's Tim Cook's "'Against God-Inspired Conscience': The Perception of Gas Warfare as a Weapon of Mass Destruction, 1915–1939", War & Society, Volume 18 Issue 1.