Like the rest of the album, this was recorded in the Bahamas for "tax reasons." Among their neighbors was Clash frontman Joe Strummer. Madness lead singer Suggs recalled in Uncut magazine March 2008: "'Grey Day' was a definite step on for Madness. I remember going to a club with a copy of it and Joe strummer was DJing. I asked him to put this on, because I thought I'd finally done something that he could dig, not just jumping up and down - but he wouldn't play it."
"Grey Day" was first performed by the band when they were known as "The North London Invaders." Guitarist Chris Foreman recalled in the same Uncut interview: "We had first done 'Grey Day' 3 years before, a '60s psychedelic thing with no structure and only a few lyrics." Foreman added: "I remember (co-producer) Alan Winstanley and I bought the album tapes back through customs. I couldn't help laughing at the sticker: These tapes have absolutely no commercial value."