The most important reason for a decrease in the number of cities would have been industrialization. This may sound counterintuitive. After all, the Industrial Revolution was a time during which more and more people came to live in cities. However, this does not necessarily mean that the number of cities and towns would increase. Instead, some cities grew tremendously while others would have lost population and eventually disappeared.
As industrialization occurs, cities grow. More specifically, certain cities grow while others do not. It is useful for factories to cluster in the same cities because they can benefit from things like large concentrations of workers that they all need. It is for this reason that cities like Manchester came to be so big and so filled with factories.
The coming of railroads and other forms of transport help to cause urban consolidation. With better transportation, there is no longer such a need for small towns and cities to dot the countryside. Most economic activity can be carried out in larger cities and some of the smaller ones (particularly away from rail lines) die out.
Finally, the growth in cities can cause those cities to expand and overwhelm their former neighbors. As a city grows, places that used to be separate communities can simply be absorbed into the main city. This, too, would work to reduce the number of distinct cities in Britian.
Thus, industrialization increased the number of people living in cities, but it also worked to consolidate the cities and to allow many smaller cities to disappear.