Oddly, in British English it is not these days a vulgarism, or at least only a very mild one. It comes from one of several senses of ****, to bend at an angle, as in — for example — cocking a gun or turning up the brim of one’s headgear (so producing an old-time naval officer’s cocked hat).
The use of ****-up to mean a blunder or error was originally British military slang dating from the 1920s. The slang sense of **** clearly had a lot to do with its adoption, but this hasn’t stopped it being used in respectable publications, and modern British dictionaries mark it merely as informal or colloquial.
The longer phrase I used it in, “a ****-up on the [something] front” was coined in a BBC television comedy The Fall and Rise of Reginald Perrin some 20 years ago and has become a minor catchphrase. The original was “there’s been a bit of a ****-up on the catering front”, which was spoken by a former army officer, not over-blessed with savvy, who was totally confused by civilian life and had either forgotten to buy any food, or run out of money to do so.