Pete Shelley is quoted as saying that the lyrics were inspired by a line from the musical “Guys and Dolls”:

I wrote that while we were doing the Orgasm Addict tour. We were up in Edinburgh, stopping at the guest house, watching TV there, and it was the movie musical Guys and Dolls.
One of the characters, Adelaide, is saying to Marlon Brando’s character, ‘Wait till you fall in love with someone you shouldn’t have.’ I thought, fallen in love with someone you shouldn’t have? Hmm, that’s good."

The BBC music website states that Shelley told a fanzine that the song was about a friend called Francis:

Ever Fallen in Love is such a universal song that Shelley shied away from talking about whom he had in mind when he wrote it. But he did reveal to the Outpunk fanzine that it was about a friend called Francis. In Buzzcocks – The Complete History, author Tony McGartland said the object of Shelley’s affections was Francis Cookson, who was in The Tiller Boys with Shelley and launched a label called Groovy Records with the singer.
“I lived with Francis for about seven years, and then he went off and got married in Switzerland,” Shelley said.
The singer said he fell in love when the pair started living together. “He was the first – well, the second – person that I actually lived with, so it was difficult at times.”