UK Located Servers (beware that not all UK host's have UK servers though) - Having UK located hosting is very important for UK businesses in regards to UK only listing's in search engines (google.co.uk for example)
Lower latancy / high response times - because a UK business will generally have a UK client base the response times and page load times from a UK server will be better.
Timezone - A UK business should be able to contact a UK host during business hours, but it maybe 1 am in the morning in some parts of the USA.
Privacy / Data Protection - one thing that a lot of UK businesses do not think about... If you collect client information then you must comply with the guidelines from the Information Commissioner's Office Information Commissioner's Office - USA companies do not have to comply with this and I don't think the USA has any general "data protection" either?
There are probably a few more points that I have forgotten... But as you can see, to a UK business a UK based hosting solution is very important.
We offer our customers a choice of UK or US server. Generally personal sites tend to go on a US box and business on a UK one.
Anyone wanting cheap & cheerful hosting will generally not pay the premium for a UK host, for those who will pay a bit more will benefit from all the features Tony points out.
Additionally a UK small business often won't pay by credit card / PayPal, they want to pop a cheque in the post (or possibly use an electronic bank transfer).
Dealing with a "real" business (even if you're doing it part time from your bedroom!) is usually important to the small businessman, dealing with someone from another country is not always seen as desirable.