TechRadar spoke to some of the crowd about the situation and they were none too happy with what was going on.
One person who had been queuing since the store opened said: "Apparently their automatic system has gone down and it is taking the folks at O2 a lot longer to process things. The upgrades are taking a lot longer than expected too."
While we were there the queue did seem to be moving faster, but the delay has meant that lots of people have been waiting longer than expected to get their mitts on an iPhone 3G.
O2, The Carphone Warehouse and Apple stores everywhere have been bracing themselves for today's iPhone launch, but reports do suggest that they hadn't quite realised the demand for the 3G iPhone was going to be this huge.
O2 announced yesterday that most of its stores will only be stocked with a "few dozen" iPhones. This may mean that there will be a lot of unhappy customers by the end of the day.