Here (HT: Marc Beishon) is a longish and questionable article on the supposed downfall of British chess. One might nitpick about a few of the facts (and I'll engage in a bit of that in a moment), but there does seem to be something to the story - a pity, given the media and cultural power of England and its historical importance to the royal game.
Let's start with some minor nitpicks, beginning with the claim that the England was once the #2 chess country in the world. It did take second in three consecutive Olympiads, from 1984 to 1988, but was it deeper than the United States or Hungary? It's arguable, but it's certainly clear that they were among the chess super-powers.
The suggestion that they've fallen below Egypt and Peru is even more absurd. Sure, they might have placed behind them in a recent Olympiad, but to draw the conclusion that England lags behind those countries as a chess power is a bizarre sort of reverse propaganda. The top English players could hold their own against anyone, and they would be underdogs against only a very few teams. (Certainly not Egypt or Peru.) Mickey Adams has been a 2700+ player for a very long time, Nigel Short is sometimes over 2700 and never too far away from that mark, and Luke McShane and David Howell have also crossed that barrier. Matthew Sadler is also an upper 2600 player, while Gawain Jones seemed headed for 2700 not all that long ago as well.
Unfortunately, the drop-off after those six is precipitous, and there don't seem to be any super-talents on the horizon. Their #7 player is John Nunn, rated 2597. The 60-year-old Nunn was a player in the second tier of the world elite (i.e. never a threat to win the title but the sort of player who was regularly invited to super-tournaments), but that was 20+ years ago. So what has happened? I'm not entirely sure, and I would have thought that Malcolm Pein's chess in the schools programs would have made a bigger difference.
Also unhelpful: snarky articles like the one discussed here. Chess and chess players aren't exactly presented in a positive light (there's no money in it, chess isn't glamorous, chess players are physically unfit, pretty much everything said by and about Danny Gormally, and on and on it goes). When we talk about chess to the "civilian" world we should be winsome ambassadors for the game - especially when we have the chance to speak to members of the media. It isn't necessary to lie or hide the truth about the negatives, but there are many positives about the game and its increasing popularity around the world. We should emphasize them!