There are three elements of hosting that affect SEO:
1) Hosting location
2) Country specific domain like .com.au or .co.uk
3) Hosting reputation
1) Hosting Location
Matt Cutts in the video below says that the location of your server, the IP address affects seo. But then he also says the the ccTLD plays a role. He recommends that you “play around” with your hosting, if you are in the UK, try a UK hosting on the .co.uk domain and see if you rank higher.
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2) Country specific domain
If you have the country specific domain, then the location of where it is hosted – either US or UK does not make that much difference. This video from Matt Cutts was back in June 2009 and in December that year, a Google employee said it was the ccTLD that was an important factor.
If you have a country specific domain, then you should not worry where you are hosted. A decent US hoster can serve web site much faster than UK one does. So this is not always the case of hosting web sites in the same country where business commences.
3) Hosting reputation
It is important to have a good hosting company. If you are sharing a server with a mixture of different spam sites, and the server often crashes, you will see a negative impact on your rankings. You need to have a dedicated server and a static IP address from a company that can give you reliable hosting where you website never falls down.
Hosting is not the only factor to affect seo, there are a number of others:
Google wants to deliver relevant search results faster then before, so if your site loads slowly, that will have a negative effect on rankings.
Google webmaster tools
In your webmaster tools account you can also set the country relevant for your site. Therefore Google will see your site is for the UK market for example and will deliver results to users in that country.
The brilliant basics of seo need to be implemented on your site. This means having optimised alt tags, page titles, meta descriptions and so on.
Hosting is one factor that affects seo, but it is not the only factor. Ensure that you have your brilliant basics in place and be sensible as well, if a hosting company is offering a lot for a very cheap price, it may just be too good to be true.