So just to update everyone.
I called 02 customer services that evening who advised me to go to carphone warehouse as the problem wasn't with 02.
Rang them the next day as the phone lines were already shut that evening.
They advised me to go in store as it may be the handset. (I told them I had ordered it online).said they would put it on the system so they would know what was going on.
Went into my local store that evening, it wasn't on the system. Turns out it was the handset but because I'd ordered it online and they didn't have a replacement handset in store they could only put it through as a repair.
Went through all the process of a repair to be told collection date would be 16/9 and my contract would still start straight away.
So I ended up deciding it would be quicker to just cancel the whole thing and start again. They agreed! Asked if I could do that here in the store to be told no as I purchased online.
Got home rang carphone warehouse to go through it all again, they tried to offer replacement handset but I'd have to go I store!!!
So have just cancelled everything, returning the phone myself and no doubt going back to payg.
Thanks for all your help on here : )