Finally found time to contact BA. It took two calls, and both times sadly Indian call centre ...
Eventually I was told that it is a business fare but its a fully flexible economy cabin as the 'cheap' business class tickets on the IB leg had sold out, so therefore I was given a 'business class' ticket in the economy cabin... as this is apparently the best value for me.
It doesn't explain why I am looking at dummy bookings next year for the EXACT same journey and its putting me in the economy cabin on the IB legs (well at least it was a couple of weeks ago when I did the dummy booking). I still think this is an IT problem as dozens of time I have done the exact same journey and its always Business cabin all legs.
Anyway she quoted the upgrade to 'Business' cabin on IB aircraft and it was well over £500 (return). I nearly had a heart attack.
But she did PROMISE that (and this is not an issue for me as I have Silver- for now) my friend who is in the exact same scenario WILL be allowed to access the IB lounge in MAD for two reasons a) we are transferring from (she called it) a Long Haul flight (I did tell her its only LHR-MAD but she insisted that bit is classed as Long Haul and the MAD-ALC is Short Haul- I am not making this s*** up! I wish I could have recorded the conversation!) and because b) the ticket and fare is technically Business Class so will get lounge access.
Never known such an absolute farce.