It is theft — S3 of the Theft Act 1968 covers the meaning of "appropriates" as follows:

"Any assumption by a person of the rights of an owner amounts to an appropriation, and this includes, where he has come by the property (innocently or not) without stealing it, any later assumption of a right to it by keeping or dealing with it as owner."

In this case, the person innocently came by the money as a result of a mistaken bank transfer. They then proceeded to withdraw it from their account and presumably spend it: thus keeping it and/or dealing with it as the owner would—meaning they appropriated it accordingly.

All other elements seem to be made out here too: A person is guilty of theft if he dishonestly appropriates property belonging to another with the intention of permanently depriving the other of it; and “thief” and “steal” shall be construed accordingly.