As previously noted, this ancient history is complex and best described by specalized scholars, but what I can determine in my cursory view is that the Celtic peoples, which were broadly present across the Continent and into the British Isles, seem to have had notable skills in metalwork.
Among these Celtic groups, of most notable skills and quality in metalwork were the Celtibereans, whose double edged swords were adopted by the Romans.
The Celts in Europe went from the Bronze Age into the Iron Age, and the Hallstadt Culture, and later LaTene Cultures swords were well represented by the notable 'antennae' type swords.
It is noted (Wiki) that "...metalwork stands out in Celtiberean archaeological finds partly from its indestructible nature", which included prestige weapons.
It seems that the heritage of the Celtiberean metalwork prevailed well into later centuries, especially with the iron work of Basque regions, which was reflected by the English term 'bilbo' for fine blades. This had to do with the Biscayan port of Bilbao, which was the port of exit for these fine Spanish blades from Toledo and other Spanish centers.
This does not answer the question, what became of the metalworking skills said to have been 'learned from the ethereal figures in the lore' after c. 1066. However as noted, are we certain that there indeed was a substantial industry of producing blades in the British Isles?
While naturally as always, there were surely incidental cases of localized production, but these do not seem sufficient to attract notice in the larger scope of records and accounts.
By analogy, this question is similar to 'what happened to the secrets of wootz, the famed watered steel of Islamic sword blades, which seem to have disappeared in the 18th c. ?'
This distinctly forged steel with profound patterning (watering) seems to have had distinct secrets in its production, with methods, the crucible steel used as well as materials added in production. After centuries, its production simply ended, and while closely imitated, has never really been reproduced.
How could a process, though secreted, still widely known by its masters, simply just vanish?
With the Celtic metalwork in Britain, I think it is more a matter of concepts and convention in production. Why go through the complexity, expense and work in producing blades when they were readily available from other sources, which had high quality blades in volume ? This was typically the case in most colonial situations, where natives were eager to acquire ready made blades instead of making them themselves.
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