Back on the actual topic:

Yes, festivals are closing, but new ones are also opening. I spent some time late last year approaching festivals just in the south-west of the UK (basically Devon, Dorset, Somerset and parts of Cornwall)on behalf of a friend who was looking to perform at some of them. I was amazed at how many there are in just that small corner of the UK. Many of them are very local, and "not for profit". Several (like Bridport, now in its second year, and only a stone's throw from Sidmouth)are run in support of a named local charity (Air Ambulance in the case of Bridport).

One reason for some failing may in fact be the sheer number running now. On any one summer weekend that I looked at over those 4 counties, there were likely to be between 3-6 festivals labelling themselves as folk festivals, or incorporating significant "folky" elements. Many appear to be run on a shoestring, and teeter on the edge of viability. Those relying on a main sponsor or significant grant funding are definitely exposed financially, given how quickly and ruthlessly funding bodies can change their priorities.