In addition to the other factors mentioned on here (increased competition etc.), I think you can trace the decline in hot hatch sales generally to the change to tax bands based on CO2 emissions, the huge rise in petrol prices and the enormous insurance premiums these days. I also think the price of premium hatchbacks (not just hot hatches) is now too close to the junior BMW / Audis - a Golf GT is £22,500, the cheapest 3 series is £23,000.
Having said that, the Mark VII may recover quite a few sales due to its low CO2 emissions & much better fuel economy.