how large is the image you are uploading? Perhaps test the system with a small image (10kb) and see if it works. There maybe a size limit on uploads. In fact I'm pretty sure there'll be a size limit on EUKhosts php installation for uploads in general - possibly 1Mb or 2Mb.
It might be that you'll have to install your wordpress again due to corrupted files - if so, export your database and re-import it once you've re-installed wordpress.
Could be worth checking with support that there are no other issues before you do that though.
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