Updating iOS using Mac - stuck on "purchased items not transferred to Mac" warning

I'm trying to update the iOS on my iPhone SE (3rd generation) from 16.7.2 to 18.2 using my MacBook Air which is on Sonoma 14.7.2

I connected them and tried to start the upgrade and got the message: There are purchased items on the iPhone "iPhone" that have not been transferred to your Mac. You should transfer these items to your Mac before updating this iPhone. Are you sure you want to continue?

I backed up the phone to the computer and tried again and I still get the same message. If I click Continue, nothing happens.

What more do I need to do?

(Also asked in the macOS Sonoma forum but it was suggested I ask here)