After checking the error log (path is in the error after the above command fails), the error message was:
Error in backup of C:\Windows\System32\scrnsave.scr during write: Error [0x80070005] Access is denied.
I did all the usual things, such as check permissions on the .scr file in question. Finally, I realised it was our anti-virus that was blocking access. I proved this by temporarily disabling AV and running the above command to create a system state backup, which was successful.
Upon further investigation, the AV rule that was causing this was an access protection rule we created as per a McAfee Cryptolocker threat advisory to prevent .scr files being executed or created.
I had to edit the rule to add an exception for the wbengine.exe process