Thanks Tom, I really appreciate your checking this out for me. I think I'm going to find a local tiler and get it done properly, not sure I trust myself with the multi tool, I'll end up cutting through the tiles lol!
Final question. I know the cracked grout is going to let water through, but would those cracks allow enough through to cause this problem? There's no direct water jet onto that wall, it's only going to get sprayed (although we do admittedly have a 4 bar pump pushing the water upstairs). I'd have thought that any water would drop vertically but is it possible there could be a leak from behind the hand held shower outlet that's causing water to run down a pipe behind the affected area? Or is that too far fetched?