A wave of companies will leave the UK if the government’s Regulation and Investigatory Powers (RIP) Bill is passed without major amendments, business leaders claim.

UK ISP’s are particularly concerned with the Bill. In the last few days, Poptel, Wellance, UUNet, ClaraNet and Greennet have all said they will move parts of their business abroad if the Bill becomes law.

Other critics of the Bill, including the British Chamber of Commerce, Institute of Directors, London School of Economics and the Trades Union Congress have called it "ill-conceived".

Civil-liberties groups nationwide condemn the RIP Bill, which has become know as the "cybersnoopers bill". RIP requires ISPs to install expensive hardware on their servers – at the ISPs own expense.

Steve Rawlinson, of UK ISP Claranet, says: "Unless the government is prepared to deliver a more supportive regulatory environment, businesses will choose to base their Internet activities overseas."

Like Poptel, Claranet - which has 350,000 customers - will move parts of its infrastructure to Europe if the Bill is passed without key amendments being made. The company is in discussions with key customers who wish to base their Internet services outside the UK to protect themselves from the Bill.

Silicon.com reports that corporate ISP Wellance was to use Britain as a base for European expansion, but these plans will be shelved if the Bill becomes law. Wellance provides secure online-transaction technology to corporate customers, including 3I and ING-Bank. Silicon.com also quotes IT consultant Gary Miles as saying: "I for one will not use UK Web services, nor would I recommend any of my customers host electronic activities in the UK post-RIP, the risks are too high."

The Home Office made several amendments to the Bill on its presentation to the House of Lords in June. Despite this, the Lords passed a major amendment to the Bill, reversing its burden of proof element. In its original form, this required that individuals prove whether or not they had access to encryption codes if asked by the security services. The Lords have passed this burden of proof back to the security services.

The European Union has also condemned the government’s "hasty and ill though out" attempt at Internet regulation. Tim Fenoulhet, director general of the Information Society planning unit in the European Commission, believes that many of the RIP Bills aims are already covered by existing laws. He says: "The government has to strike a difficult balance between catching those carrying out cyber-crime, and protecting data and the vulnerable."

The government recently announced that it intends funding the National Computer Crime Unit, which will be created by the legislation, to the tune of £50 million. This unit, which will be housed in the headquarters of MI5 at Vauxhall, will be non-accountable, and staffed by representatives from the National Criminal Intelligence Service, the National Crime Squad and Customs and Excise, Silicon.com claims.

The UK government says it aims to make the UK the most attractive environment for e-commerce in Europe. With some of the UK’s largest ISPs threatening to quit the country, this seems unlikely, according to analysts.

Rawlinson says: "If growth in the use of the Internet by businesses for internal, business to business, and business to consumer applications continues as forecast, then you can be sure that British jobs are going to be lost. For any international company, it really doesn’t matter whether Internet services are based in France, Germany or the UK. It does matter to the UK economy – jobs will be lost, or at least created elsewhere in Europe, directly as a result of this legislation."