Continuous payment authority makes whole balance unavailable if not enough funds

Continuous payments are handled differently than an ad-hoc purchase. You've already incurred the liability, and the bank will do whatever it can to satisfy it, even if by partial payments. The merchant, on the other hand, may not agree to accept partial payments, which results in the situation you described.

The continuous payment kicked in, saying "give me up to £300". The bank says "the best I can do is £170.68", resulting in the hold of the total balance. The merchant then (is supposed to...) say "no, thank you, I want the full £300", but that last part probably either isn't happening or isn't handled properly by the bank. Since you tagged it as united-states, it may be that you used a US debit card to pay in the UK? In which case it may be that the US bank isn't handling this properly. Continuous payments are usually not a thing in the US.