How does Google geographically categorise websites?

Hey

Just a quick question. I am running a UK based commerical website, with a .co.uk but on American hosting. My target audience are purely for the UK and so my organic search traffic should only be coming from Google.co.uk - however, I was told earlier today that by using hosting from outside the UK could reduce my Google rankings?

Is this true?

Not true.

If you want to force Google to treat your .com site as a UK site create a Google Webmaster Tools account and you have an option to specify your target area.

I never normally bother for .co.uk though, what with it being a UK specific TLD.