After 3 days of speaking to Apple, 1st level, then 2nd level, then 3rd level, then being referred to Apple UK 4th tier support, who then referred me to Apple international enterprise partner support. They have finally acknowledged there is an issue. They will not take no responsibility for causing the problem because they say it is a “cross level system” ie Apple talking to Microsoft, even though it only affects ios 10. They have said they are working on a fix but it won’t be rolled out until most likely the next couple of versions of ios 10. They apparently will keep me in the loop on their progress.
For the time being the only workaround I found is to use the Microsoft Outlook client for iphones, until Apple notifies otherwise.