This will only erode worldwide encryption if the app-makers do actually include a back-door right? (E.g. scan client side). I expect, at least some, to refuse (Apple comes to mind with their refusal to unlock iPhones in that one terrorist case*), so that would mean that worldwide privacy is still intact?
It may be made impossible (illegal) for the app makers to operate in the UK (how this stops Signal for tech-literate users I am unsure, they can sideload and potentially donate to signal just fine I presume? So, signal at least loses little from refusing). At worst, this would just further alienate the UK from the rest of the world, which is not a good thing, but not necessarily a direct issue for app users outside the UK (caveat, less trustworthy apps will totally comply without outright stating this, so it may be possible that some apps are comprised, but that option exists even without a law requiring backdoors)
*I seem to remember that apple refused/could not unlock aan iphone in US court which belonged to a (supposed) terrorist, but the details escape me. I may be completely wrong here, but I am fairly sure that Apple generally refuses to break encryption/safety on their products