At my current salary, it would take me about 10 days of work to reach £585 in straight labor costs.

Honestly, that doesn't seem to be too overly ridiculous to me. There is a lot of work that goes into designing them (and installing them into each page of a website, especially if the favicon was new and not an update). If the company in question didn't have someone perfectly familiar with the site in question, I can see it taking a week or so to get it out the door. What costs would be added by going through the process of taking bids? I wouldn't be surprised if those in themselves ran to £100 - £200.