Take SSL/TLS. Are they going to demand both parties stash the session key, or do their handshaking through a proxy logging each packet?
Probably not. You're thinking like a geek instead of a politician. Politicians don't get their way by understanding technology. They get their way by finding people who do and forcing them to obey their will.
In this case, what Cameron means by banning encryption is passing laws that say something like, "If your website is used by people in the UK, you must always be able to comply with a warrant demanding data and you must provide all data, even if it is encrypted". The exact details of how that works is neither here nor there to them.
Now of course the interesting thing is how this interacts with jurisdictions, and whether it would be enough to make GCHQ shut up (probably not). The UK may or may not be able to force the hands of Facebook/Google/etc because the UK is such a huge market and they all have offices there, but China was a huge market too and Google walked away from that anyway. So it's hard to know how things would play out. For companies that have no UK exposure it's not clear what they'd do - probably use ad-hoc blocking of any website they suspect might be used by The Evil Terrorists if it doesn't comply. Could be a mess depending on how heavily they enforce it.