grey fluff on apple tree

Any photos Rita?
Could it be Apple Powdery Mildew http://www.which.co.uk/documents/pdf...dew-151462.pdf

If it's on the stems and 'bleeds' red when squashed, it's probably woolly aphids. They are a special bark-attacking type of aphid which protect themselves under a thick coat of fluff.
If it's on the leaves it might be powdery mildew (many trees have dropped their leaves now so I expect it's not the leaves).

Woolly aphids can be removed by brushing them off (some people add some washing up liquid while others scrub with a brush and then paint some meths on them), making sure you check once per week afterwards for the next season, so get rid of any survivors or eggs. Badly damaged stems are sometimes best removed.
Sprays don't work because the fluff shields them - and will kill the beneficial insects which usually keep them down to manageable levels (hoverfly larvae, ladybird larvae, lacewing larvae, earwigs and tiny parasitic wasp larvae - the 'wasps' look like tiny, skinny, black-coloured, winged aphids). Some varieties are more prone than others. Some varieties and some rootstocks have resistance.

If it's mildew you can spray with certain fungicides, but the more you spray the more you're likely to need to start spraying for other things once you've knocked the eco-system out of balance. Some varieties - especially common ones - are prone to mildew. Some varieties are resistant. Certain rootstocks and certain soils/climates seem worse for mildew than others.

thank you for your advice, i think i did not water my tree enough this year as it is growing by a wall which gets a lot of sun. I will keep a close eye on the tree next year and act accordingly.

Woolly aphids attack apple trees (and certain other trees/bushes) regardless of whether the tree is adequately watered.

The best you can do is get rid of the woolly aphids the instant you see them and check a couple of times per month for the rest of that season to get rid of any you didn't find the first time (including eggs which have hatched since the last time).
Trees can be cured if you take swift and decisive action, but the longer the woolly aphids are left, the poorer the outlook because the more damage they cause and the more they weaken the tree and the greater the chance of other nasties entering the split bark and deformed shoots (including similar damage to the roots if the aphids have enough time to spread downwards - and you can't do much to remove them from the roots once they are there).

If woolly aphids are a serious and persistent pest in your area you can plant resistant rootstocks and resistant scions to deter their attacks and/or reduce the amount of damage they cause.

Young trees can be ruined or even killed by woolly aphids and the canker which they seem to carry and which sometimes follows their attacks.

Indeed, the MM rootstocks* were bred specifically to try to save the apple-growing industry in warmer parts of the British Empire, where woolly aphids were causing so much damage that apples were almost un-grow-able.

*Today, only MM106 remains in widespread use, with small numbers of MM111 also available, plus the more recently released but difficult to find M116 which was bred from MM106 and also has woolly aphid resistance.
A resistant rootstock still won't offer much help to a highly susceptible scion.