There are probably several reasons, and it's likely impossible to answer without writing a book, and most of the reasons are not political but has rather to do with economics.
One of the major reasons is based in fundamental economics. The Bismarckian welfare state is based on social insurance, ie, the government pays for an insurance that the welfare recipient can use as they best see fit. The most clear example is in health care, where the Bismarckian health cases system has a tax-funded health insurance which you can use to pay for to a largely privately run health care system. This preserves competition and ensures efficiency better than the British system (often called the Beverige model), where the health care system is not funding individual health care, but instead funding state owned health care. This creates a monolithic bureaucratic system where the health care is overpriced. The result is typically that the rich pays for better private health-care, while everyone else are forced to endure long queues and waiting lists for operations, fueling resentment and dissatisfaction with the system.
The second major reason is political, and that is that the unions in Britain used their power to a large extent to block change and economic reforms. When industry was going badly, the Unions would not accept changes as this would have resulted in cut downs, instead they striked to prevent the cut downs, which just resulted in companies shutting down completely. This resulted in a conflict between the unions who were unrealistically blocking reform, and the union-supported government who tried to make reforms and still keep the unions happy at the same time.
This impossible situation and the resulting economic decline was then only reverted when a conservative government took over, as this government did not need nor want the support of the unions and went through with the economic reforms despite the unions opposition.
Countries with similar situations to the UK (like Denmark and Sweden) saw similar development. Both Denmark and Sweden has also, like the UK, made many free-market reforms, and both are busy improving their health-care problems by moving the a Bismarckian system (but not the UK, yet).