These cheap pay-as-you-go phones are subsidised by the network--normally, you have to buy at least a £10 topup to get it, and if you look at the website of a phone shop like Carphone Warehouse, you'll find the exact same phone listed at different prices on different networks.

Of course, once you actually go into the shop and buy it, you find it's the same (unlocked) handset. But because you bought it on, say, O2 instead of Orange, you get it cheaper.