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makemetop - 3:01 pm on Aug 27, 2008 (gmt 0)
My original hosting company moved my .co.uk site from the US to UK (where it had been) and I moved up a couple of places - then to Germany when it dropped 1. Including these marginal movements - it has been in the top 5 consistently for 6 years.
It puts much more value on the domain. A .co.uk will come up higher on Google UK even if you hosted in China! The IP location only has a slight deflationary value if you have 3 or 4 UK sites all of equal ranking "power" - you may lose a position or 2. If that is not the case - it really isn't worth worrying about.