Originally, it wasn't the Shire that was meant to be England but Tol Eressëa. There is a lot about this in the Book of Lost Tales 1&2.
bilbo_baggins: Not all of the parts in Middle-earth correspond to parts of our world. There are just similarities. Not too long ago, this map was posted on a thread. Go
here to see it. This should clear up some of your questions.