Six nightclubs a week are closing with competition from pubs open later and cheap supermarket alcohol ramping up the pressure on the sector.
Research from Mintel shows that a total of 355 clubs closed last year — 13% of the country's 2,722.
"Nightclubs were struggling prior to the recession as people increasingly opted for late-night bars," said Jonny Forsythe, of market researchers Mintel.
"However, the economic downturn has accelerated their decline meaning that consumers — and particularly nightclub's core target of 18-24 adults — have much less disposable income to spend on their leisure activities.
"As a result, these younger consumers have little choice but to drink more in-home. with alcohol being much more affordable in supermarkets, who deliberately discount in order to attract footfall."
"The increasing gap between the cost of alcohol to drink in-home and that bought in the on-trade (ie pubs, bars, clubs and other licensed venues) which can be as much as five or six times more expensive, has meant a general shift towards in-home drinking for the UK population over the past five years.
"Our research shows that if young people do decide to go out, they are more likely to stay drinking in pubs where they can maximise their spend rather than having to fork out on nightclub entrance fees and usually drinks which come at even more inflated prices."
Late night levy
Paul Smith, executive director of late-night trade body Noctis, said: "There are still some clubs doing very well — those who are delivering a high quality offer, great service and fantastic entertainment — but discretionary spend is a lot tighter and competition is greater."
Smith warned the closure rate of clubs could yet get even worse if the Government goes ahead with its proposed levy on late night venues to help pay for police and other services.
The industry is currently lobbying against the proposal in favour of Business Improvement Districts and Best Bar None schemes.
"There are already 142,000 policemen out there — that's more coppers than we have ever had — and they are complaining about being burdened by an overly bureaucratic system.
"We don't need another tax, we need to free them up to do their jobs."