Watch stuck on "Bring Iphone near apple watch"

I have a watch series 5 that hasn't been used for a few months (but was previously successfully paired). I turned the watch on yesterday and it didn't recognise the phone so I tried a few things, but then tried unpairing the phone and starting again from scratch. I am now stuck on "bring iPhone near apple watch" but when I try this my phone says it can't because the watch software needs to be updated - but I can't see any way to do that.

I don't know if I have managed to wipe the watch? We've also recently changed Wifi password so I don't know if that is a factor.

Any advice would be much appreciated!