Yes, I think you're all spot on and I've got a clear picture now.
Went to a Tesco ATM in Ealing last night, asked for 100gbp, declined their currency conversion (9.99% fee) and it spat out my money.

Checked my bank and was debited $127.76 (compared to the mid market rate of 125.52 according to the Google's. )

I also recently changed to an account that doesn't charge ATM fees so that's really not too bad at all all-in.