When you set up web hosting, sometimes you are given a geographical choice - Do you want to host your site on a datacenter in the US or the UK, for example. What are the benefits to choosing either one?
Datacenter Location and...
The physical location of your webhost's datacenter can affect the speed of your website. If you put the same website on the same type of datacenter in the UK and one in the US, someone from the USA visiting your website would get have a better browsing experience seeing the site served from the US datacenter.
This is simply because the data being sent from the closer location will, all else being equal, get there faster because it has less distance to travel.
Speed is a big factor in Google and your audience liking your website, so some say that Google assumes if your target audience and the website's physical location match, you're doing something right and awards you with a boost to your rankings. The thing is, because it's one of so many other very small factors, you don't need to worry too much.
It seems that hosting in the UK is more expensive than US hosting. If your target audience is in the UK, you'll have to decide if the extra cost is worth the potential benefits. You could choose to go the cheaper option and only upgrade once you deem your traffic volume worth the extra cost.