No it's the bevel box to swinging arm bearings, either shot it completely or need tightning up - more than likely knackered though. Cost £30 for the new bearings or £100s if you take it to your local highway man (AKA BMW dealer).
Pull the rubber boot back, stick a finger up placing it on the bevel box near the bearing so as your finger also touches the swingarm bore. Get someone to wiggle the wheel 3/6 and see if you can feel any movement. Any movement equals new bearings - £12 each from Motorworks.
Get someone to depress and hold the rear brake pedal and see it this eliminates the free play. As I understand it, this locks the wheel to the bevel box. Should this remove the free play then the problem should be with the main bearing within the bevel box.