Very possibly. It will be an excuse to gather more user data. Will the lost users be the valuable ones for their business model? Also, once people have registered with a site, it imposes a switching cost, so it does favour incumbents over new entrants.

There must be smaller sites in the same business that will block UK users rather than comply.

So, they very likely do.

What is more important is that the tech giants, and social media in particular does love this law. As I pointed out in another comment, and has been reported many times on HN before, they have already gained users as people switch from independent forums to social media, and in the future it will keep competition out.