Routine road maintenance at one time included 'taking up' the road: removing bricks or cobbles and re-laying them to lie more evenly. For instance, the New York City Record for Nov 17, 1905, includes this under the Division of Street Repairs
The work done by this force consisted of taking up, repairing and relaying the various kinds of street pavements and sidewalks as indicated in the following table of work done.
The narrator of this story assumes the workmen whom he encounters are municipal employees ‘taking up Piccadilly’—repairing the London street of that name. It is not until he examines the hole they have left and sees not the underlying earth but “darkness down there, all full of the southern stars” that he realizes that they are not merely taking up the cobbles, but
taking up Piccadilly altogether.
Here, from The Glasgow Herald of July 15, 1927, is what the narrator thought was going on: