T20 (and similar) is certainly impacting a lot of the younger batsman games.
Someone like Phil Salt has played 50+ games of T20, Hundred or t10 this year.
Many of the seemingly best batting prospects of the last 5 years are now playing a majority of 20 over/equivalent cricket. Joe Clarke, Ben Duckett, Tom Kohler-Cadmore all spending the winter playing franchise cricket. All with 30+ games this year.
Established pros like Vince and Livingstone with 40+ games across the year in the shorter formats.
Talented strikers of the ball that have been brought up on T20 like Banton, Salt, Smeed, Jacks all with overseas stuff this winter. All playing a majority of T20/equivalent cricket. These guys probably are never going to going to develop a game to be able to play test cricket.
Smeed has 28 games in T20 or equivalent. Hasn't played a fc or 50 over game. Already playing Abu Dhabi t10. He was one of the best prospects coming through the England agegroups (although impacted by injury) and yet what is his future in the game?
In the English season alone you can play upto 25 domestic t20/equiv games in 2021, that's not including international games. You add in the various lucrative opportunities to play overseas over the English winter, and many of these young promising batsman just aren't going to put the effort into their 4 day game.
You can see technically with some of these players what T20 has done. Guys like Joe Clarke who've adapated their technique to hit the ball harder and access the legside with bottom handed dominant grip leaving them with shoddy techniques in first class cricket. Similar to Crawley and Bairstow.
It's just very hard to see how any of the guys mentioned are going to make it at test level. It's just too easy and profitable to play all the t20 cricket you can. Sure a Livingstone would jump at the chance of playing test cricket if it came up but how prepared would he be having played a majority of t20 cricket over the last years? Livingstone played 6 championship games for Lancs this year and averaged 11 with the bat. He'd play, probably fail, would be a little disappointed but would fall back on his lucrative t20 career, and not really work on his failed first class game. A bit like James Vince for instance, or even Dawid Malan.
Unfortunately even guys who are seen as primarily 4 day players are looking on enviously on those making decent money playing T20. Players like Alex Davies and Adam Lyth have had gigs with franchises in recent times. More and more will be drawn to this.
T20 an issue for all countries. England have some issues that are more specific to them:-
They play more than most (upto 25) if not all during their domestic season. This is excessive.
English winter coincides with the majority of domestic T20 cricket so no shortage of profitable opportunities for English players. This means lack of work on 4 day game and more focus on white ball game.
Players are allowed to miss domestic first class cricket to play IPL because it is so profitable for counties and players, to the detriment of their first class game.