They're sticking to the letter of the law, unfortunately. Not especially helpful though.
They have not repaired it with appropriate skill if it is worse than it was. If the repair is not satisfactory under the same sale of goods act they are trying to get you with, that is grounds for rescission of contract ie a refund. By offering a repair to begin with, they have accepted there is an inherent fault with the handset.
Try them again armed with a copy of the sale of goods act click here
Alternatively, it has a one year guarantee with Sony Ericsson. Contact them?