Hi Cliff,
Thank you for your reply and further advice. I can confirm that the column type is a single line text column and I have also not used any JSON code for the column formatting.
I think that I have found the source of the problem, but in doing so have discovered a new problem! The only way that I could get this flow to run successfully in my real list was to have the highlighted dynamic content entry below as the equivalent to 'Lookup to Column 1', rather than 'Lookup to column 1 Value' . I assume that in your flow, you used 'Lookup to column 1 Value'?

When I created a new List A and List B, as you did in your example, I was able to successfully run the flow and get a text version duplicate of my desired column. However, when I try to put together the exact same equivalent flow in my real list, in the Update Item step, when I select 'Custodial_Group_Value' as the dynamic content for the newly created single line text column called 'Custodial_Group_Copy', the content automatically disappears and instead a new 'Apply to Each 2' step pops up with 'Current item' already populated. See below:

When I run this flow, it fails as shown below:

Do you know what is happening and how I can fix it to get the flow working on my real list?
Many thanks for all of your help.
Nic