I know about the Spanish Armada - Spain still had as many colonies supporting it throughout the centuries and most of them were far less likely to challenge control than the British interests in China and India. Were they simply not as profitable as the British colonies? European competition for Spain was sparse in Latin and South America compared to all the European companies sailing about africa and asia. Not to mention spain had a more manageable distance on its territories. I know the answer is probably a complex one that considers the later Napoleonic era political climate of Europe, I just can't find an easy answer.
The first thing to remember when exploring history is that there is no "easy answer". However I will attempt to give you a more simplified answer.
We should start from from 1492. 1492 is generally considered to be the start of the Spanish golden age as it is the year in which Spain initiated its transformation into a world power. In this year Spain finally ends its reconquista (reconquest) of the iberian peninsula by taking control of Granada and Columbus "discovers" the "New World" (I used quotation marks on the basis that one cannot discover what is already inhabited by humans and the "New World" was certainly not new to the indigenous people, however these are both terms that are not easily avoided when discussing Columbian history which is mostly dictated by the European voice).
After the discovery of the New World the Spain leads the way in the stampede by several European nations, namely Portugal, France and later Britain, to conquest the Americas. The conquered lands were are still are hugely rich in valuable mineral and metal deposits, most notably silver, gold and copper. This mineral wealth went straight to the Spanish crown and was used to fund the construction of opulent palaces and cathedrals and wars which ultimately contributed in part to the economic decline of Spain. However it doesn't end there and there several others things to consider. After all history is not so black and white.
You mentioned in your post that
Spain had a more manageable distance on its territories
I would argue that notion that Spain's colonies were "manageable" by any measure is false. Whilst it is true that its Latin American colonies were relatively close together as the crow flies the terrain of the South American continent makes for a logistical nightmare. The attrition suffered by Spanish armies when trying to suppress the Independentist armies heavily contributed to the Spanish Crown ultimate loss.
A bit more about the colonies' declarations for independence. Its generally accepted that the trigger was Napolean defeating Spain and installing his brother Joseph on the Spanish throne in 1810. Simply, once news of this happening had reached the Americas (don't forgot it took between 3-4 months to traverse the Atlantic), many people thought "So our king is French (yes Napolean and his family were Corsican yadda yadda yadda). What loyalty do we owe him?" to which the answer by some was "None whatsoever". Argentina is the first to rebel and eventually achieves independence in 1816. Several others follow suit, others not, and the reinstated Spanish crown attempts to combat the rebellions and fails.
That's an extremely brief over view of post-Columbian Spanish history but I hope it helps you to better understand hows things evolved.
But don't go yet there's more!
The next big point in Spain's fall from graces is El Desastre (The Disaster) of 1898. Spain loses its last remaining Latin American colonies (Cuba, Puerto Rico and the Philippines) to the United States after engaging in a war it had neither the popular support nor economic strength necessary to engage in. The thinking behind this, in my view, was that it would be better perceived to go down fighting and lose than to have simply conceded to the U.S. The result was a major loss of support for the Spanish government and an increase in support for parties such as the socialists, communists and republicans. The Spanish government continues to make the wrong moves by fighting wars in Morocco and conscripting soldiers to fight the wars.
Realised this becoming incredibly long so I will attempt to summarise and give you the simple answer I intended on giving.
Reasons why Spain fell behind Britain and the other major European powers.
Instead investing the vast quantities of wealth gained from its oversees territory into modernisation it is mostly diverted into the nobility the Church and wars, lots of wars.
Spain could not manage its Latin American colonies easily. The South American continent was a logistical nightmare making it far more difficult to for the Spanish to suppress the Idependentist rebellions.
Political and military coups happen like they are going out fashion during the 19th and 20th century. The obvious result is massive instability in both government and populace.
The nationalists pop up with Franco at the helm (A lot of things to talk about here but lets stick to the topic of Spain's development compared to Britain and other European powers). Nationalist government prioritises self-sufficiency when the country is incapable of achieving this as it is already lacking behind most notably in terms of agriculture and industry.
Due to the huge expanse of history that needs to be covered to have a complete understanding of the issue many of my points here a very brief. However, I hope this gives you a better picture of Spanish history.
Britain industrialized while Spain didn't. Spain remained extremely poor into the 20th Century.
As for why, economic factors both natural and man-made since the 1500s led to Britain developing, starting with increased agricultural productivity, then on to manufacturing. Britain had large amounts of coal and energy readily available which helped. I don't know as much about Spain specifically but I do know that their policy regarding their colonies was economically destructive for them, with large amounts of inflation and neglect of domestic industries because there was so much gold coming out of America