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1. Two-word phrases are the most commonly used; for example if one person is trying to find "portable DVD player", he will search for "portable DVD" instead of the full pharse;
2. Actually very few people add "UK" to the end of the search phrases, altough I like to use search term + "UK" for any products, and some webmasters here also like to use the same way, but the general public does not behave the same way;
I'm a UK only, UK based marketeer and my clients generally stress UK in order that they remove the outside UK results.
I suppose it is based on what you sell. If you sell homes, searches will be much more geographically precise.
its a difficult line to draw - if you by default direct users to the smaller dataset (i.e. restricted to the UK) of course you will get more targeted results.
but you also greatly increase the chances of empty or less relevant SERPS because you are only looking at a smaller subset of the web. which makes the engine look less good.
Put it this way, it's not a huge thing to add, and if it increases your traffic and/or business, then it's worth it... or that's my take on it anyway.