At first I was a little puzzled as to why they did this, but it makes some sense. If you were a British author wouldn't you prefer to do business with the local branch of Amazon instead of the US corporate parent? The paperwork might not be simpler, but it will follow UK rules and laws so it might be more familiar.
I think there's a good chance that we'll see similar announcements when Amazon opens local ebookstores in other countries.
Note that the royalty option is less in the UK store than in the main Kindle store.
From the press release:
Amazon.co.uk today announced that publishers and authors worldwide are now able to upload and make their books available in the Amazon.co.uk Kindle Store using the self-service Kindle Digital Text Platform. The Kindle Digital Text Platform (http://dtp.amazon.co.uk) is a fast and easy tool which allows publishers and authors to add their books and start selling in the new UK Kindle Store in minutes. Books that are uploaded to the UK Kindle Store are available to UK customers via Kindle devices and Kindle apps for iPad, iPhone, iPod touch, PC, Mac and Android-based devices....
Amazon recently made improvements to the Digital Text Platform such as a more intuitive ‘Bookshelf' feature and a simplified process for publishing. Additionally, publishers and authors can upload and make available their books in English, French, German, Spanish, Portuguese and Italian. They are also able to set the digital list price for their titles on Amazon.co.uk in pound sterling.
Publishers that hold publishing rights for the UK and related territories will earn a 35% royalty for sales made on Amazon.co.uk. For sales made in the US via Amazon.com, publishers can take advantage of a 70% royalty option. In the future, Amazon intends to make the 70% royalty option available for UK sales as well.