The familiar aroma of tempered spices and caramelised onions begins to emerge at noon from the Spice Rouge curry house on Stevenage high street, a full six to seven hours before the evening rush begins. The white-tiled kitchen, with food hygiene edicts taped to the walls, is cosy: barely big enough to hold a nine-burner range with a few pans stacked above, a deep-fat fryer, a small tandoor oven, a worktop and a sink. Plastic tubs of Patak’s spices sit on the shelves above the chopping area.

Six Bangladeshi chefs, all from the hilly subtropical region of Sylhet, chat away in their local dialect as they chop their way through four buckets of onions (it is a Friday, and the curry house will have double its normal number of orders), a 10kg bag of carrots and a kilo of garlic.

Then the head chef, 36-year-old Abdul Kadir, begins the most important job of the day: making the “base sauce”. This beige elixir, which sits in a 10-litre stockpot on the corner of the range, is the secret ingredient in almost every British curry. A mix of onions, carrots, garlic, ginger, turmeric and other spices, the sauce can be customised with a couple of dashes into a madras, bhuna, vindaloo or any of the other curry-house standards. It boils away for 90 minutes and is then blended and left to rest until the evening.

By 3pm the mania of preparation is over and the chefs retire to a six-room apartment above the restaurant where they spend a few hours chatting, dozing, playing computer games or, as observant Muslims, praying. By the time the first customers push through the door, everything is already cooked. Otherwise the chefs would never survive the stack of orders that soon accumulates.

The Spice Rouge used to be the mock-Tudor White Hart pub, until it was bought and converted five years ago by Oli Khan. Also from Sylhet, Khan is a tall man with a thin, neat goatee, a thick-knotted purple tie and a spotless Land Rover Discovery. There are eight other curry houses on the street but Khan had a National Curry Chef of the Year award to his name and the restaurant has been a success. According to TripAdvisor, its customers are particular fans of its “giant onion bhaji”, which, one reviewer notes, is “the size of a small child’s head”.

But this Christmas, business declined from the year before and Khan is worried about the future. The price of a curry, treasured by the British public but always thought of as a cheap dinner, has barely changed in 20 years but costs are rising fast. The weakness of the pound has doubled the prices of spices imported from India. Cooking oil and rice have become more expensive and staff costs keep going up. “We are much less profitable. Our profit margin used to be 20 per cent, now it is 10 per cent. Staff is a huge problem,” he says.

Oli Khan, the owner of Spice Rouge, Stevenage © Thom Atkinson

Britain has been in love with curry since at least the 1940s and over that time an estimated 12,000 curry houses have mushroomed across the country, even in the smallest villages. But tastes are changing. Once curry houses only had to compete with Chinese takeaways, kebab shops and fish and chips. In the past decade, chain restaurants such as PizzaExpress and Nando’s have spread rapidly. Curry houses, by contrast, are almost all family businesses and often trade only in the evening, with the bulk of their business at the weekend. They have struggled to shake off an image of serving heavy and unhealthy food to men full of lager.

We are much less profitable. Our profit margin used to be 20 per cent, now it is 10 per cent. Staff is a huge problem

Meanwhile, the trend for more adventurous food among the British public is firmly entrenched, says Peter Backman, managing director of Horizons, which monitors the food sector. Last year, Eastern Mediterranean and Middle Eastern food grew in popularity, as did Vietnamese cuisine, ceviche and the Canadian dish of poutine. “People are looking for something new, perhaps authentic, exciting and innovative. If that is what they are looking for and someone opens up, then they stop going to where they used to go, and that includes curry houses,” he says. “A number of the most innovative and successful operators are chains and they have more marketing muscle and the ability to get the right sites, which small-scale independent curry houses may struggle with.”

The nation’s largest seller of curries is now the pub chain JD Wetherspoon, while more and more people are staying at home and trying their hand at making their own vindaloos. The expanded offerings of supermarkets also mean that consumers have a greater choice of ready meals than ever before: one well-known Indian restaurateur said, off the record, that curries from Marks and Spencer are superior to those of most curry houses.

Sag aloo, tadka dal, chicken nazakat, bread and rice at Spice Rouge, Stevenage © Thom Atkinson

“The food they are making is a declining commodity,” he adds. “The British public is coming to an awareness that what these curry houses are serving is not real Indian food. Sales have been declining steadily and the people eating there are mainly now in their forties and fifties. The younger generation are not eating in curry restaurants.”

80%-90% of British curry-house owners can trace their roots back to the Bangladeshi city of Sylhet

There is a lot to lose. Curry houses employ 100,000 people and have annual sales of £4.2bn, according to data compiled last year by Lord Karan Bilimoria, the chairman of Cobra Beer and a member of Parliament’s curry committee, which advises on government policy. “It is a very serious crisis,” he says. “There are a lot of restaurants closing and many more are struggling to survive. The only reason that curry has become so popular is thanks to pioneering entrepreneurs who moved to every high street and opened restaurants as complete strangers. That has not been appreciated.”

As well as running the Spice Rouge, Khan is vice-president of the Bangladeshi Caterers’ Association (BCA), the largest of the many trade bodies claiming to represent the curry industry. The BCA also uses the word “crisis”, warning that one-third of the nation’s curry houses could soon go bust. Khan points to Stevenage as an example of what is happening nationwide. “Four years ago there used to be 32 curry houses in Stevenage. Now I think there are 18. A lot of them have shut down.”

The menu in a British curry house is richly evocative of the history of the Indian subcontinent. Biryani was refined from the Persian pilau by the kitchens of the Mughal emperor Akbar, who reigned from 1556 to 1605. Vindaloo first appeared in 1797 when Britain invaded Portuguese Goa; the dish is a mispronunciation of the Portuguese carne de vinho e alhos, or meat cooked with wine vinegar and garlic. The rogan josh and dopiaza (“two onions”) were both also originally Persian, while madras curry was a colonial invention, after English merchants arrived in Chennai in 1640.

But modern British curry-house owners have a narrower lineage: 80 per cent to 90 per cent can trace their roots directly to Sylhet, a city of about 500,000 people which lies in the east of Bangladesh and borders the Indian region of Assam. Sylhet is not known for its cuisine: its most distinctive speciality, says Lizzie Collingham, the author of Curry: A Biography, is its dried punti fish, hung from rafters and surrounded by flies until it is ground into a deep red fermented paste.

Nor were the Sylhetis who came to Britain chefs: they were originally boatmen, hired to stoke the engines of British steamships. The job was unbearable and Sylhetis became notorious for jumping ship in ports around the world. In London, a small community took hold in the East End in the 1940s and some entrepreneurial Sylhetis soon began setting up boarding houses and cafés and then bringing over their relatives.

Dishoom’s Nalli Nihari lamb stew, served with a plate of mint, fresh ginger, green chilli, coriander, onion and lemon, Bheja (lamb’s brains) and a sesame-onion-seed naan © Thom Atkinson

“The Sylhetis in London had to find a living, [so they] start washing up in London restaurants and then they start buying up rundown cafés and fish and chip shops,” says Collingham. “They often served English food and then some curry as well and eventually they morphed into curry restaurants. In the 1960s there was a lot of immigration to work in textile and car factories and that is when you get the surge of Indian restaurants,” she adds.

“What happens is that one person who runs a restaurant might recruit their family to be waiters. The Sylhetis tend to emigrate in family networks. They then go off to open their own restaurants. You get a chain. That is how it works in India. It is hereditary too, from father to son.”

But what was a strength in the 1970s and 1980s — a strong flow of cheap labour bonded to curry houses by family ties, especially after the violence in Bangladesh following its independence in 1971 — has become a weakness. As earlier generations of curry entrepreneurs begin to retire, their children, often university-educated, prefer to work elsewhere. There is even now a cultural stigma to having to work in a family restaurant, an implication that it was impossible to find a job of any other kind. Fewer UK-born Bangladeshi women are returning to Bangladesh to find husbands to bring back, robbing the industry of another labour source.

Veeraswamy, the UK’s first Indian restaurant, in 1962; it opened at 99 Regent Street, London, where it is still located, in 1926 © Rex

Khan even blames Uber, the taxi app company, for disrupting the curry trade: “A lot of people in London have joined Uber . . . including chefs, tandoori chefs, waiters, managers — even the owners of restaurants,” he says. “We do not have the profits we used to and now a lot of people value the freedom of that life. They do not have to have the headaches of running six people in a kitchen, and if your food is not consistent, you are responsible. In a cab company you just go there and drive the car.”

Non-Bangladeshis are also reluctant to work in the industry. Khan says he did hire Eastern Europeans in the past, but they quickly moved on. “It is not rocket science but they do not want to do it,” he says.

A £1.75m “curry college” scheme in 2012 to train British chefs collapsed within a year after failing to attract enough applicants. The government said at the time that immigration rules are based on the understanding that “we do not need to attract people to do jobs that could be carried out by British citizens, given the right training and support.” George Osborne recently repeated the policy: “We all enjoy a great British curry, but we want the curry chefs to be trained in Britain.”

100,000 people are employed by British curry houses

Despite David Cameron’s promises of support, the BCA blames the government’s immigration policy for “totally destroying our industry”. The Home Office does not publish statistics for visas by industry, but the number of work visas issued to Bangladeshis has fallen from 40,393 in 2009 to 23,278 last year. From April this year, restaurants that want to employ a chef from outside the EU will have to pay them a minimum salary of £35,000, or £29,750 with accommodation and food, to qualify for a visa. Previous government restrictions prevented Bangladeshi students, a key source of flexible labour on busy weekends, from working in curry houses.

Khan, who currently pays his chefs between £18,000 and £25,000, complains that only the most successful curry houses will be able to stomach the latest hike. He is not alone. Bodrul Zaman, 37, who owns nine curry houses with his family, including the Indian Ocean in Luton and the Spice Rack in Harpenden, warns that he “may close a few restaurants this year because of the staffing problems”.

No curry champion has emerged across the UK. The biggest chains are regional, such as the Aagrah group, which has 16 restaurants in Yorkshire, and the Harlequin Leisure Group, which has recently sold four of its 14 restaurants in Scotland.

There is no tradition of large restaurant businesses on the Indian subcontinent, says Lawrence Frederick, 41, the manager of six London branches of Saravanaa Bhavan, a vegetarian restaurant from Chennai that has franchised its way around the world. “If you are a successful Indian restaurateur you have one, maximum two restaurants,” he says.

£4.2bn in sales are generated by the industry annually

Jamal Hirani, 48, who used to run the Tiffinbites and Bombay Bicycle Club chains, points to another factor. “The chains of curry restaurants that are out there are family-oriented, family-built and they only go as far as how many cousins and uncles and whatever they have, then it stops,” he says. “In the Asian mentality there also is lack of trust. You only trust the members of your family. And it’s not really a corporate mentality. You need to apply a corporate mentality if you want to build a chain — with processes and standardisation in the model.”

Spice Rouge’s king prawns © Thom Atkinson

Hirani came to England in 1972 after his parents, ethnic Gujaratis, were expelled by Idi Amin from Uganda. He joined a tech start-up, Pricerunner.com, in the dotcom boom and decided to put his profits into opening a chain of Indian restaurants. “One of my biggest frustrations has been the whole idea of Indian cuisine as unhealthy, full of fat, made out of ghee. But authentic, home-cooked Indian cuisine is not like that, otherwise every Asian would be fat and obese, right? And that’s not the case,” he says. “And the whole connotation has always been we go out for a few beers and we have a curry, right? And that is not it. I wanted to educate the market.”

Hirani put in £200,000, raised the same amount again from friends and family, and founded Tiffinbites in 2003. “The way I developed Tiffinbites was based around, I guess, an Indian Pret A Manger-style approach,” he said. “The whole concept that I developed was around fast trade, fast in the lunchtime and evening. We captured a huge lunchtime market in the City, because City boys enjoyed being able to come down and have a curry for lunch without having to wait and without having their clothes smelling of the damn thing.”

12,000 estimated number of curry houses in Britain

The business expanded rapidly, with all of his branches served from a large central kitchen in north London. Hirani also snapped up catering contracts from the likes of Compass and the airlines — KLM, Kingfisher and British Airways — who were running flights to India. “Our margins were great. Because we were centrally run, we were, for example, buying one lot of chicken, making one lot of sauce and then distributing it out. It was much more effective because you can buy in bulk and make better deals. So I would buy at the volume that I was going through, because the central kitchen was also delivering into all the different concessions. I had over 1,500 concessions around the country and food would be once a week from a Tiffinbites. If you look at Nando’s, it’s all about volume, it’s all about buying in bulk.”

As the financial crisis hit, Hirani borrowed £4.3m from the Indian bank ICICI, which was keen to lend to Indian diaspora businesses, to purchase 14 Bombay Bicycle Club restaurants from Clapham House. He opened four more, but in 2009 sales across the company dropped 12 per cent and he was left facing a loss. He sold his 30 per cent share to new investors, fronted by the Bollywood actress Shilpa Shetty, and bowed out after a legal tussle. A few years later, the chain went into administration.

Hirani still dreams of a chain of Indian restaurants with central production, a consistent product and good marketing. “I am thinking about putting together a business plan and a concept to really take on this market and have a chain of fast-food Indian restaurants that could be 100 venues. One that caters for the consumer, is cool and trendy, and fits into lunch and dinner,” he says. “The sector is completely fragmented at the moment and I see, over the next 10 years, that market even fragmenting more. Indian restaurants are closing on a weekly basis.”

Prime Minister David Cameron meeting chefs at the British Curry Awards in London, November 2013 © Getty

Britain’s traditional curry houses may be in crisis but there is still hope out there for the cuisine they produce. Peter Backman says that new delivery services such as Just Eat and Deliveroo have helped to level the playing field with the chains, offering better distribution to curry houses. Meanwhile, the landscape of new Indian restaurants has never looked brighter, as entrepreneurs try to fill the gaps between curry houses and high-end luxury Indian restaurants. Niche restaurants are also popping up. In London’s Soho alone, there is Sri Lankan cuisine at Hoppers, “fish and masala chips” at Cinnamon Soho and Indian street food at Imli Street.

In the wake of the financial crisis, as Jamal Hirani was busy expanding his way into trouble, Ranjit Mathrani, his wife Namita and his sister-in-law Camellia Panjabi were doing the opposite at Masala Zone, their colourful eight-strong London restaurant chain.

“The reason why we haven’t grown is very simple,” says Mathrani. “We took a view in 2008 that we would be very conservative because we saw immediate changes in the residential eating-out market. Until we saw the economic clouds lifting we were not going to be putting our heads above the parapet in a hurry.”

Now, he says, those clouds have lifted and the chain will start expanding across the country towards the end of the year. “Our processes are in place, our systems are in place. We would never see ourselves as having 200 restaurants because we need scale with each one, but we will be in all major urban centres, the large cities.”

When we told our families we were looking at the restaurant business they laughed . . . people thought we were idiots

In London, Shamil and Kavi Thakrar, two scions of the Tilda rice family, initially delighted their families by going into management consultancy and government. But now they have become a rare example of second-generation British Indians who have gone into the restaurant business, opening four branches and counting of Dishoom, an Indian restaurant based on Bombay’s old Irani cafés, which now see lengthy queues.

“When we told our families they sort of laughed. And not just my family. The reaction from people was, well, with my background at Bain and Kavi’s at the World Bank, when we said we were looking at the restaurant business people would think we were idiots,” says Shamil, adding that he does not want Dishoom to become a huge chain but does not rule out that he could create a chain restaurant with another concept.

“We stand on the shoulders of the curry houses. A curry house is a pretty British phenomenon, one that is as British as any evening in a pub in the 80s or 90s . . . sort of smoke-filled, and it had a jackpot machine, and I can’t tell you it was the highest of quality of experiences. But there’s something pretty special and specific about that. And we all have memories of going to curry houses and ordering things like vindaloo. There’s a cultural reference there and I’d be sad if that disappeared,” he adds.

But Dishoom is a long way from that experience, and the Thakrars have poured their energy into making each one distinctive, with its own imagined history. And they do good business at breakfast (the bacon naan roll is legendary), lunch and dinner. “One of our cultural missions was: Indians are very cool people. There are loads of cool Indians around the place but we seem not to have La Dolce Vita and Fellini like the Italians, or the Gauloises and berets of the French. And yet I think Indian culture is very cool. And I wanted almost to reappropriate Indian stuff and recontextualise it so that it’s cool.”

Dishoom founders Kavi (left) and Shamil Thakrar © Thom Atkinson

The leading pizza and hamburger chains in the UK were started by British entrepreneurs, rather than ethnic Italians or Americans. But almost everyone working in the curry industry believes that native nous remains a magic ingredient. “This is an art and you need to be Indian to understand it properly: how to grind and mix the spices, how to leave the dosa mixture to ferment for just the right time,” says Frederick at Saravanaa Bhavan. “Indian food needs specific skills,” says Lord Bilimoria at Cobra. “You can guarantee there has to be a South Asian chef. You cannot just recruit anyone and follow a recipe checklist.”

“There is a hypothesis that curry houses have a requirement that, unlike pizza, burgers or noodles, you probably need to be Indian to understand the cuisine,” says Shamil Thakrar. “That means the sort of entrepreneurs who have attempted them are from the ethnic group of Indians. And while there have been some Indian entrepreneurs, the mainstream [investors] have not tackled it.”

Khan disagrees. At the Spice Rouge in Stevenage, his first wave of customers begins to trickle in at about 6pm. “Curry is in people’s blood. People are actually addicted,” he says. But the Chinese takeaway next door has shut down, and his regular customers are coming less often, perhaps once a week instead of three or four times.

“Why did the pubs close? Because they did not make any changes and beer cost less from the supermarket,” he says. “The Chinese restaurants have not changed.” But curry, he predicts, will continue to evolve. “Our industry welcomes everybody. Come and join. This is now British curry. It is not Bangladeshi or Indian, it is British and anybody can do it.”

Malcolm Moore is the FT’s leisure industries correspondent

Photographs: Thom Atkinson; Black Dog Fepresents; Getty; Rex Features