Although they were now being touted as the 'next big thing', several complex issues slowed their progress. Gilbertson's drug problems presented the band with no choice but to ask him to leave. Booth and Glennie had joined a sect named Lifewave that imposed many restrictions on their lifestyle and threatened the band's stability. The band's second EP, James II, was released over a year after the first and accompanied by a feature on the cover of the NME, Gilbertson having been replaced by the band's guitar tutor Larry Gott. The first two EPs would later be collected as Village Fire. Reviews were once again positive, and Factory were eager for James to record an album with it, but the band believed Factory were purely image-based and left the label, striking a deal with Sire Records.
Their third release, the Sit Down EP (no relation to the song of that name) came out in February 1986, and was followed by their debut album, Stutter in July of that year. The album reached number 68 in the UK Albums Chart. Low on money and lacking coverage and promotion, the band recorded their second album, Strip-mine, attempting a more conventional song structure in an attempt to please Sire. The album almost went unreleased, but after undergoing a slight remix to sound more radio-friendly, Sire released the album in September 1988, over a year after it had been initially completed. However the album only reached number 90. After finding a clause for ending their contract, the band left Sire. Desperate for money, the band members were driven to the extreme of participating as human guinea pigs in medical experiments at the Manchester Royal Infirmary, earning them a place on a TV