There was a time, when dance floors were multicoloured glass and the Bee Gees were staying alive, when discos ruled the school. The late 1970s revival of the dance craze, sparked by the release of the "Saturday Night Fever" movie and its squillion-selling soundtrack album, was a gift to discotheque operators, who had been experiencing, to say the least, a lull in business.

The joint cultures of boy-meets-girl and people-drink-late ensured that, throughout the 80s, the disco prevailed. The heady mixture of fashion and passion that was late-night entertainment meant that every available building, both in and out of town, was being converted to the concept disco. Romeos and Juliets everywhere arrived at their local Top Rank Suite to find it renamed Tiffany's or Cinderella Rockerfeller's. The kids danced their white stilettos off, profits soared and millionaires were created overnight as the last of the dying breed of cabaret clubs were reborn as 2,000-capacity palaces of entertainment for the coolest of 80s cool.

But currently, if one is to believe the naysayers, nightclubs are about to boogie themselves back into oblivion. The proliferation of late-night bars, the imminent prospect - for the umpteenth time - of licensing hours deregulation and the virulent growth of in-home leisure pursuits such as computer games and multi-channel TV, has left the industry with, seemingly, fewer handbags around which to dance.

Or has it? A swift survey of operators at all levels reveals anything but an industry in turmoil. Almost without exception, the industry reports increased profits, growing markets and ambitious plans for the refurbishment of existing venues and the development of new ones.

"It's nonsense to say that nightclubs are a declining market" says Steve Thomas, boss of the biggest chain operator Luminar PLC. He pours scorn on the latest "lifestyle" research - "they never even bothered to talk to us!" - which shows a decline in the overall potential for nightclub visits. With almost 300 existing venues and plans to open a total of 44 new units this year, of which 13 are large-capacity nightclubs, Luminar is clearly not subscribing to any predictions of doom and gloom. Thomas stresses the importance of strong brands - Luminar's nightclubs include Liquid, Life and, definitively, The - and the need to tailor the product to each individual town, not the town to the product.

"Trading is excellent" says Paul Kinsey, chief executive of First Leisure, which operates 50 large-capacity clubs country-wide. "We had a record Christmas and a record Easter." Whilst currently concentrating on converting existing units to the company's new brands, "Creation" and "The Works", Kinsey has another new concept fresh out of R & D and ready to rock in early 2003. Like Thomas, he too is growing his business organically, with four refurbishments of existing businesses either completed or planned and six new sites for big, wow-factor nightclubs at various stages of planning and licensing.

Scottish chain Castle Leisure are equally bullish, with an ambitious £13.5 million expansion plan in place, albeit for multi-purpose leisure venues rather than pure nightclubs. New units in Perth, Edinburgh, Falkirk and Glasgow will create upwards of 500 new jobs and the 50,000 sq. ft. Glasgow unit will, overnight, become Scotland's largest licensed premise, cocking a snook at those who pooh-pooh big-venue late-night entertainment.

The latest set of results for the Springwood group, run by veteran nightclub entrepreneur Adam Page and parent to brands such as Zanzibar and Cobarna, shows an increase of over 60% in operating profits and, by the time you read this, Page will have announced acquisition, likely to demand a total investment of some £25 million, of around 11 venues from other operators including First Leisure "and there are literally hundreds more clubs we'd like to buy" he says.

Operators agree that the industry does have issues, but these relate, in the main, to licensing and public order rather than any concern over footfall. "Licensing reform is likely to remove many of the certainties that the industry has grown up with" says Jon Collins, director of trade association BEDA. "We're lobbying hard for a level playing-field, to ensure clubs are able to compete on a fair footing with pubs and bars. I'm pleased that the latest drafting instructions from the DCMS look likely to achieve this balance."

As more local authorities pre-empt deregulation by issuing late licences to pubs and bars, rationalisation in the nightclub industry is inevitable. "The good operators who offer something more than just a liquor retail outlet will prevail and grow" says Kinsey. "The market is so cluttered that the poor venues will die off and that's no bad thing."

The proliferation of dedicated nights for students, over 25s and even the under 18s has helped to keep large-venue operators competitive and cutting-edge. Ian King is chief executive of NUS (National Union of Students) Services, which holds some 80 Section 77 licences, covering hybrid venues as well as bespoke nightclubs, some on campus, others as inner-city venues, along with some 200 bars. King's nightclubs, which need to make money to fund other student union activities, have suffered from competition from the chain operators and pub groups targeting his core clientele.

"The chains now claim students as a major source of consistent revenue across the whole week rather than just one night - there's been a major change in landscape for us" he says. "We were slow to respond to start with - there was a degree of complacency, because we felt we had a captive audience and that they would stay on campus because it was cheaper.

"But they wanted quality and our reaction is now robust and innovative. We don't have megabucks to throw at venues and only have a 30 week retailing year and our USP is late-night opening, which could be lost with licensing changes, so we're encouraging SUs to look closely at their offer. The student unions now talk to the competition and try to work with them, for example where the SU bar can act as a feeder for a commercial nightclub."

Richard Carr's Future 3000 company operates five venues, with a sixth about to open, in and around Bournemouth in Dorset, that most sedate of seaside resorts. He, conversely, has shifted emphasis away from clubs to large-capacity bars, nightclub hybrids with 800 capacity and a turnover, in the case of his Toko Asian-themed bar restaurant, of almost £60,000 a week. "The long-term future for clubs that can't generate an atmosphere is a little bleak" reckons Carr.

With the current increase in focus on street violence and the toe-in-the-water paid-for policing schemes under way in selected cities, public order issues provoke full-bodied responses from most club operators. "The majority of club incidents are on front doors, not inside" says Luminar's Steve Thomas. "Pub landlords operate within an uncontrolled environment, they let customers drink too much and then dump them on our doorsteps at 11pm! To be honest, we don't want the pubs' customers - I'm happy to let them stay late in the pubs!"

Richard Carr is rarely troubled by public order problems in demure Bournemouth, but views the concept of paying for policing as just another example of indirect taxation, an opinion shared by Peter Marks, chief executive of Georgica, which has 10 clubs in its portfolio. "The subject will always be a political hot potato" he says. "Clubs, unfairly, do not enjoy a moral high ground stance in the eyes of the general public, so there is little sympathy over public order issues." "Morally, I'm against paying for policing" says Steve Thomas, "but if premises are more troublesome that their rateable value permits, they should be told and a police officer placed on their front door at the operator's expense."

First Leisure's Kinsey welcomes the fact that responsibility for fuelling binge drinking by discounting is now being laid at the feet of the early-night operators. "Trouble usually starts around 10pm, when traditional nightclubs are not in full swing. The industry has social accountability to adopt a sensible approach to discounting" he says, mentioning, aghast, that he recently spotted pints being offered for 30p, "That is just grossly irresponsible."

The overall view is that the statutory authorities should keep a watchful eye on saturation levels in urban areas, to permit sensible competition without deep discounting. And, in an ideal world, a one-stop centralised authority to cover planning, licensing and all other issues associated with late-night operations - what Paul Kinsey describes as "joined-up government" - would provide a welcome change to the current landscape.

"The best operators with the best businesses in the best locations will always provide good returns" Georgica's Marks says, concisely. BEDA's Jon Collins adds "We will soon be operating in a world where the clued-up nightclub owner, who works closely with the council and the police, and is considerate to his neighbours, should be able to secure a trading advantage over his less socially responsible competitors." The view of Paul Smith, joint managing director of Castle Leisure, is that "the future of the industry is dependant on good operators producing high-quality products within strong brands" and Paul Kinsey says "6,000 bars have opened in the last 3 years, most of them aimed at the nightclubs' monopoly, but big clubs offer a diversity of excitement and theatre that simply can't be replicated in a pub." Steve Thomas agrees. "It's a non-issue. There's no way that late-night operators will lose out to pubs - we're flexible, we have the square footage and the management skills to deliver the best entertainment."