Well of course flying the Union Flag upside down is a distress signal. As for why it is being flown. Perhaps because that sequence is set in the UK, and the Union Flag is just a visual indicator that we are in the UK. Just as if it was set in the US the American Flag would be flying.
Exactly how is the Union Flag supposed to be upside down? An American flag, upside down, would have the field of stars at the bottom of the flag. The Canadian flag would have an upside down maple leaf. The Union flag is symmetrical, is it not? Putting it upside down gives you the same image, non? (or maybe I need a new pair of glasses)