THERESA May’s Snoopers’ Charter will have a massive impact on Scotland’s tech industry and financial services, as companies warn of a “mass exodus” from the UK should the Bill be approved.

Part of the Tory Government’s Investigatory Powers Bill, introduced in the Queen’s Speech, will force companies using encryption software to include “back doors” into the software.

If passed into law, it means that any software or hardware made in the UK must contain a way that allows data to be accessed by the Security Services.

Organisations such as MI5 and GCHQ will be able go through this “back door” to see information held by business and financial services using British made software. The impact, analysts warn, will be falling sales for those companies making the programmes, and for financial services who need to keep customers’ data safe, many of whom will undoubtedly relocate overseas.

Duncan Chapple, a researcher at Edinburgh University who specialises in tech security, said: “There will certainly be organisations concerned that their business transactions will be more open to Government oversight. It seems very sensible to start thinking about moving servers to another country.”

The academic also warned that it could have a direct impact on inward investment: “Not only if you’re a British company, but also, perhaps more so, if you are the British subsidiary of a foreign business, with which an important British business competes then you will be concerned about becoming a target of commercial spying which the British state does to serve British industries.”

Over the weekend, two companies announced that they would be leaving the UK because of the law – and Eris Industries both claimed that the new law would drastically affect their business.

On a blog post, Preston Byrne from Eris highlighted why he thought the UK Government’s plan was wrong.

Bryne wrote: “The fact is, however, that cryptography overwhelmingly protects legal businesses and ordinary people, not criminals and terrorists, from harm.

“Strong cryptography should therefore remain entirely free and legal. If this Bill is passed into law, we are likely to see a mass exodus of tech companies and financial services firms alike from the United Kingdom. We are happy to lead by example.”

Nick Lambert, from Troon-based MaidSafe, sympathised with Byrne’s decision.

Lambert said that the work being done by MaidSafe simply could not be done if the Snoopers’ Charter becomes law.

He added: “Our product is very much a security product. It has encryption automatic, within the way it works.

“You literally couldn’t install back doors, it would break our system. In terms of that being an option, that’s not an option.

“If they made it illegal for us to have products going out there with encryption it would cause us problems because our product can only exist with encryption and it’s not technically possible to put back doors, the way the system’s designed. You just can’t do that.

“It would break the actual fundamental design. That would cause us issues. As to what we would do then, well who knows?“

Ed Paton-Williams, campaigner with Open Rights Group, said that they could foresee many companies moving operations overseas: “I would not be surprised if more companies come out and say [leaving the UK] is something they would consider doing. It reduces their ability to do business securely and that’s crucial to showing that they’re profitable because they rely on trust with their consumers and their customers.”

A spokesperson for the Scottish Financial Enterprise, which represents the financial services industry, said: “None of our members have voiced concerns to us about this. However, privacy and data security are taken very seriously in the industry so we will monitor developments and discuss with members where appropriate.”

The Investigatory Powers Bill was first proposed as the Data Communications Bill in 2012, but was blocked by Government coalition partners, the Liberal Democrats.

Now, with nothing to hold them back, Home Secretary May and Prime Minister David Cameron have a renewed zeal to see the Bill reintroduced.

As well as the introduction of the back doors, the legislation would require internet service providers and mobile phone companies to keep records of every single user’s internet browsing activity, including social media and services such as WhatsApp. Details of email correspondence and voice calls would all be stored for 12 months.

During a speech in January, Cameron asked: “In our country, do we want to allow a means of communication between people which we cannot read?”

The Prime Minister continued: “The first duty of any government is to keep our country safe. The attacks [on Charlie Hebdo] in Paris demonstrated the scale of the threat that we face and the need to have robust powers through our intelligence and security agencies in order to keep our people safe.

“The powers that I believe we need, whether on communications data, or on the content of communications, I feel very comfortable these are absolutely right for a modern, liberal democracy.”

At a conference over the weekend, internet inventor Sir Tim Berners-Lee warned this would be a defining moment for the web.

He said: “This discussion is a global one. It’s a big one, it’s something that people are very engaged with, they think it’s very important, and they’re right, because it is very important for democracy, and it’s very important for business.”

A Scottish Government spokesperson said: “While we are supportive of law enforcement agencies and security services having access to the information they require, the appropriate checks and safeguards must be in place to ensure that the requirement to keep our communities safe is balanced against the civil liberties we are all entitled to.

“We will consider the implications of the Investigatory Powers Bill once a draft has been published by the UK Government and the review of investigatory powers by the Independent Reviewer of Counter-Terrorism legislation has been published.”