The reasons for Britain’s decline from the position of pre-eminent global super power and the break up of the British Empire are undoubtedly complex and multi-faceted. Here are some of them:

Relative decline in Wealth:

One of the reasons Britain became the hegemon was that Britain innovated the Industrial Revolution, and that led Britain to become the richest nation on earth. Although Britain continued to become richer throughout the 19th century, other nations grew their economies more rapidly and began to catch up. It is easier to copy than to innovate. Once the institutions, technologies, competencies and skills required for industrialization became understood, other nations could industrialize without having to go through all the painful trial and error, and begin to catch up. Furthermore, they (especially Germany) demonstrated the ability to catch up and rival Britain economically, without having much of an empire.

Relative Decline in Power:

After seeing off the French threat in the Napoleonic Wars, Britain had no rival in the ability to project power around the world (Naval power). With a secure Island base, and command of the seas, Britain could control a global empire and protect its interests very inexpensively. No need for a large army. However, as competitor nations grew (Russia and the USA), consolidated from smaller entities (Germany and Italy) or gained technological parity (Japan) the number of potential threats to British Hegemony, and the power of the individual threats increased.

Exhaustion of Manpower and Treasure:

WWI and WWII proved very expensive for Britain in wealth and manpower. Of course, they proved very expensive to many of Britain’s rivals as well. But some competitors (the USA) did not lose anywhere near the same wealth and manpower.

New Technologies:

One advantage Britain had long had in being the global hegemon on the cheap was that the Island position meant that Britain could concentrate on global power projection without having to invest much in defending the homeland. As aircraft and submarine technologies developed, however, island Britain became much more vulnerable. From before WWI onward, Britain had to devote more and more resources to the defense of the Island, which left fewer resources for global power projection.

Moral ambivalence:

Through the 19th century Britain developed and adopted a popular narrative of the course of British destiny (Whig History). The national myth became that the history of Britain was a triumphant and inexorable progression towards ever greater freedom, liberty¸ and democracy. This was a popular myth, and it served to set Britain apart from its enemies, which were generally more despotic and tyrannical. Britain was proud of her credentials in liberty and democracy, and leadership in activities such as outlawing the slave trade and abolishing slavery throughout the Empire.

The British were not hypocritical enough to really be able to convince themselves that freedom and democracy were good for the British but not good for the British colonies.

The British could have chosen to try to build pan-Imperial institutions that would make the whole Empire more free and democratic, but they weren't really keen on giving up their own control of their own affairs to share control of the Empire with others. Thus, it became to some degree inevitable that the colonies would become independent. This was increasingly obvious to the British and the colonials from the early 20th century onward, and the debate only really focused on timing and process.

As Britain’s position as global hegemon and super power faded, its willingness and ability to hold on to the Empire declined. It seemed, (from the example of Germany - no empire but very competitive economy) that the Empire was not really much of an economic asset, and might be an economic liability. The Colonies wanted independence, and Britain had few morally justifiable arguments to deny them. The ability of Britain to project power around the world to protect and compel the colonies was in severe decline. There were many factors tending to dissolve the empire, and not many tending to preserve it.

Post WWII there was very little chance of Britain maintaining her Empire. If Britain had started much earlier (say just before the American Revolution) trying to build a representative Empire out of her colonies, who knows what would have happened, and what the world would look like today?