State theatre shows loss (7)
I believe the answer is:
wastage
'loss' is the definition.
(I know that wastage is a type of loss)
'state theatre' is the wordplay.
'state' becomes 'wa' (I've seen this in other clues).
'theatre' becomes 'stage' (stage is a kind of theatre).
'wa'+'stage'='WASTAGE'
'shows' is the link.
(Other definitions for wastage that I've seen before include "Atrophy -- careless destruction" , "Loss through careless use" , "Unnecessary loss" , "Loss through decay" , "natural decay" .)