I seem to have sorted the problem! I went through the troubleshooting guide at How to troubleshoot problems that occur when you start or use Word - Office | Microsoft Docs.

After deleting the Word data registry subkey at HKEY_CURRENT_USER\Software\Microsoft\Office\16.0\W ord\Data the Replace function started working again.

I'm grateful for your reply, Charles - when you asked if it worked in safe mode that got me thinking in right direction. Many thanks!