I'm an American, and don't know the folk scene in England at all, but there are a few reasons for loss of traditional music that apply over here as well as there.

Perhaps part of the problem is that the communities in which the traditional English songs and tunes evolved in the first place are no longer existant. England is such a small country that displacement of people and migration from the countryside into urban areas quickly changes the sense of LOCAL community that people feel, and changes the traditions that fluorish naturally within a local community. Even in Ireland this kind of regional mixing results in the loss of particularly regional fiddle styles or tunes.

In immigrant groups that stay together in particular parts of town, kids grow up surrounded by the music which is a part of the life of that immigrant group, and take its influences with them if they leave the group.

Where would English kids absorb the traditional tunes and songs today? If a tune was used for a local rural barn dance, and barn dances are no longer a part of the life of the community, the traditional links are broken.

It becomes similar to the differences between people who practice a religion they were raised in versus people who have chosen a religion as adults. Adult converts to a religion or musical form are almost always more intense and studied about that form, because the links to childhood and daily life aren't there. And, as with religious groups, aficionados of a particular traditional music style sometimes develop an "us vs. them" mentality.

This isn't exclusive to the English. There are very few genuine "source" singers and players of many various traditional music styles here in the USA - by sources, I mean people who are a part of and learned the music from within the communities it evolved in. However, there are still musicians, young and older, who have discovered this music through recordings, festivals or having the opportunity to hear a source, who have fallen in love with the music and make it their mission to learn it and more about it, even though they aren't rural farm kids or sharecroppers or miners or ...

There will probably never be a LOT of people who love traditional music forms, either here or in England - but the communities that gave birth to those forms were mostly small groups of people bound together by similar occupations or geography in the first place. The number of "converts" that a musical form gathers will insure its survival past the survival of the community from which it evolved.