Yes Bill - any domain extension that indicates the target audience will be fine
Birmingham - you have posted in another thread "ask me any SEO question..." and yet you did not know this well known fact - that search engines use a servers physical location (via geo-ip location) to determine relevance???????
This has been known for a long time and the SE's admit to it openly... Without it the search engines could not possibly know the relevance of any .com / .net / .org etc...
The current arguement is IF having UK hosting increases your position in the SERPS for UK only searches over your competitors using non-uk hosting. The evidence seems to state that IT DOES - so you are better with a .uk domain on a UK server if you are targeting UK customers
