To encourage new answers, I will award the bounty to any new answer. (e.g. answer and you will get the bounty) I understand this question is difficult to tackle and do appreciate all new insights.
According to this UK report:
There were 48 UK institutions offering physics degrees in 2005. This is 31 fewer than there were in 1994.
Since 1996 26 universities have ceased to offer chemistry degrees.
5 [mathematics departments] have closed since 1999.
While the report may be from 2007, this is still a current issue. The Royal Society for Chemistry has reported on a proposal to close the chemistry department at Bangor University. Apparently, Bangor Needs Chem.
This degree has been designed especially for candidates without the usual qualifications in Mathematics and Physics to be able to pursue their interest in electronics and computer science to degree level.
Looking specifically at the words "without the usual qualifications in Mathematics," doesn't this speak negatively to the reputation of the college and its graduates? Is there a benefit (e.g. and in addition to financial) to closing STEM departments?
In summary, what are the effects (both positive and negative) of closing STEM departments? It is preferable if answers draw upon both theory (research studies, government reports, etc.) and practice (historical studies, your original research on past events and effects).
While the examples are from the UK, the question is about the effects of closing STEM departments in general and not specifically in the UK.