I won't say there's hard evidence of a more illiterate civilization, but there's anecdotal evidence all around.
But like I said earlier, for this kind of thing anecdotal evidence is completely useless. Humans are really,
really bad at telling apart fake patterns from real ones, or even
nonexistant patterns from existant ones. That's the whole reason there are double-blind studies and the like, to make up for our deficiencies.
No amount of anecdotal evidence could tell us anything about literacy rates for exactly that reason.
If I can tell you that two people out of my class at school in the UK (at age 16) could barely read, that's anecdotal evidence. I know seven others in my year (from five other classes) who also could barely read, that's 9 out of 180, or 5%.
Now extrapolate that to the 1300 or so secondary schools in Britain - - 9x1300=11,700 boys and girls who can barely read when they finish school and go on to have approximately 2.5 children = 29,250 children of the next generation who probably won't have any interest in reading. And so on.
Except you don't have any statistical basis for knowing that it's reasonable to extrapolate from that, because you have no way of knowing that your school is representative. Any statements like that would have to be randomized over a representative cross-section of the UK population and controlled for possibly confounding variables. With your example, just off the top of my head, not only is it restricted in geography and quite possibly social class (considering that overall, upper and lower class students would tend to be found in differing schools), but it's in fact
likely that students of low literacy in any nation would be concentrated in a few schools because poor education is one of the major causes for illiteracy.
That's why whenever possible you have to make random selection, because otherwise it's quite possible that other confounding factors could be biasing the results of the survey. All that can really tell you is an estimate of the literacy rate in the general area where you and your friends went to school. And even taking all that into account, your anecdotal evidence still suggests a literacy rate of 95% overall, which is not that bad. (As for statistical evidence, studies in the UK have also given a literacy rate of somewhere between 99 and 100%, same as most every other first world nation.)
There's some other problems with the rest of your analysis too. First, you're assuming that having parents of low literacy necessarily implies having children of low literacy, which I would want to see some evidence for beyond any sort of common sense-based reasoning before I agreed. I'd agree that they would
tend to have children of low literacy, but I dunno if I'd say they would even
probably lack interest in reading (at least, assuming that by probably you mean "a significant majority", and not something on the order of 50%+1). I mean, that would essentially be the same as saying encouraging reading amongst children of low literacy parents is completely useless.
Second, by just multiplying the number of low literacy students by the number of children per
couple (not per person), that's equivalent to assuming that every single low literacy person would have children with someone of high literacy which is very unlikely; the other extreme (also unlikely, though very slightly less so) would be that only people of low literacy would intermarry, giving a result based on your 2.5 children per couple figure (itself incorrect, as figures from 2009 indicate the average fertility rate in the UK is around 1.66 children per couple; even 40 years ago it was only 2.0) of 15000, which means that your figure should be a range somewhere between 15000 and 29000, and most likely towards the low end considering the correlation of low literacy and low social class, and the overall tendency for marriages to occur within social class. Now, it is true that birthrate tends to be higher for people in lower classes, and so for the same reason low literacy couples would probably have an average fertility rate higher than the national average, but I'd be surprised if it was still as high as 2.5; pretty much every first world nation has an average fertility rate hovering around the 1.5-2.0 range, and class divisions aren't yet
that extreme in the UK so far as I'm aware.