The number of clubs began to decline in the 1980s
It would be interesting to see the proof of that. Supposedly there were 300 clubs in the sixties.
The 60's were a unique time, the original teens of the late 50's were young adults, tertiary education expanded, disposable income soared. Any number of reasons can be postulated for the attraction of folk in the 60's. Dylan, Baez, The dubliners regularly hit the charts and thus got airtime, aided by the likes of radio luxemburg, Radio caroline etc.
Conscription finished and teens had cash, and could act as individuals as the national service mincing machine could not bust them all to the lowest common denominator. All these factors aided folk music.
https://en.wikipedia.org/wiki/British_folk_revival

How popular folk is rather comes back to the ongoing debate. How do you define FOLK? Does electrification take the likes of the Strawbs, Run Rig, Fairport etc out of the equation? Is it a celebration of a fossil artform? If not, what are the modern equivalents? and of far more importance where and how do you categorize them?
Did folk actually decline or morph into other genres that fill the same void?
Could" I hate Mondays" be a modern folksong. It ticks many of the boxes!

The description below, if adhered to, defines folk as a fossil art form and takes no heed of modern technology. Either the music is an anachronism or the description.
a song originating among the people of a country or area, passed by oral tradition from one singer or generation to the next, often existing in several versions, and marked generally by simple, modal melody and stanzaic, narrative verse