New iWatch setup requires iWatch update that hangs & unpairs

I cannot set up a brand new apple watch series 5 with my iphone 7 plus running iOS 14.4. Setup starts, iwatch pairs and get message "Software Update is available for this Apple watch, update now to continue setup" Hit update and hangs then unpairs. Have reset to factory setting on iWatch, rebooted both.....will not do upgrade and will not allow set up. Stuck!