Apple Watch GPS+cellular

A GPS only Apple Watch can Exactly what you said.

If your Apple Watch is near your iPhone, it does everything a cellular model does. Away from the paired iPhone, and its ability to communicate with the internet is limited to WiFi if available or no Internet access at all. Once you get back near your iPhone, full functionality is restored.

Please read the following

https://support.apple.com/en-us/HT205547

Make sure you read the footnotes

I believe O2 has just announced support for Apple Watch (or is about to make it available). You would need the watch to be added as a second device on your existing iPhone plan - same plan, extra device. There is likely to be an additional fee for the extension to the plan. Contact O2 for more advice and costs on your plan.

The Watch works fully without a cellular plan. I have the Nike 4 and it doesn’t have a plan and works as expected. I believe o2 are only plans for the series 3 at the moment