Fleet replacement is a rolling process

Would the Royal Navy replace a large cruiser fleet with fewer, better ships?

Possibly, but replacement would occur gradually and the final number would depend on the roles the fleet still had to cover.

A navy does not normally operate one fleet unchanged for twenty years and then replace it all at once. Individual ships age out while new designs enter service as part of a continuing process. Whether successors should be fewer and more capable depends on the missions and on which ships they replace. Better technology therefore does not by itself determine the final hull count.