Does IP Address Location Affect Google Ranking (SERP)?

Hello everyone,

I'm new to this forum and to internet marketing in general but have a lot of experience in web design and hosting. I was thoroughly inspired by Terry Kyle's epic case study post and have started my own SEO adventures.

I've got a set of about 10 keywords I'm aiming to rank for (all well-researched niche keywords) and have had my pages indexed for about a week now.

I've noticed that although I'm ranking well for Google.co.uk, my US ranking pale in comparison. I realise that the US market is more competitive but the competition is not very good and I expected to rank much higher. I'm using a .com domain but myself and my servers are based in the UK, could this affect my SEO? I've heard conflicting things (which seems to happen a lot in SEO btw), some saying it does matter and some saying it doesn't. But I can't see any other reason for there being such a huge difference in the results I'm seeing for the two countries. According to Google's webmaster help pages IP address does matter but not as much as the TLD used (not much help).

If the server IP address is the problem can anyone suggest a solution? I've considered using a content delivery network (CDN) to make my server's appear as local as possible but that's a bit pricey and I want to avoid it if possible. I could just use a US-based hosting provider instead but would that hurt my UK ranking?