We've moved it to Internet Marketing, which is the place for SEO discussions.[/ot]
Anyway, just wondering if hosting location has an affect on SEO. I live in Ireland and have a few sites hosted with an Irish company, but I am currently making a site for a friend in Madrid, and was just wondering if hosting in Ireland will be an issue, SEO wise.
Hosting country is a factor, but it is one of over 200 factors, so it is unlikely to be 'make or break'. In a nutshell, Google wants to know where your site relates to. If you have a .es domain, all the text is written in español, it mentions Spanish places or has Spanish contact addresses and phone numbers, most of the links to it are from Spanish websites (etc) then just because you're hosting it in Ireland isn't going to confuse Google into thinking it's mostly relevant to people in Ireland – they are smart enough to know that you're aiming it at people in Spain.
That's where the location of hosting comes in ... it isn't that you get more 'points' for hosting it in the home country, it's just about how well Google can pin down your target audience. If everything else all makes that clear, you shouldn't need to worry about the hosting being in a different place.