LONDON (Reuters) – Britain’s manufacturers association on Thursday slashed its forecast for growth in factory output next year, citing huge uncertainty around demand and energy prices.

Make UK downgraded its forecast for manufacturing growth for next year to just 0.6%, down from the 1.7% forecast in June.

Soaring energy costs, caused by Russia’s ongoing invasion of Ukraine, have eroded consumer demand and pushed up operating costs for businesses.

“Eyewatering costs and a very difficult international environment… (threaten) to shatter expectations of a sustained recovery from the pandemic and put many perfectly viable businesses at risk,” said Stephen Phipson, chief executive of Make UK.

A Make UK survey of manufacturers published with accountants BDO showed scant sign of a boost to exports from a weak pound, which fell this week to its lowest level against the U.S. dollar since 1985.

UK manufacturers have not been able to sell abroad more easily, partly because the high value-added nature of UK manufacturing means many firms sit in the middle of global supply chains so are less well-positioned to take advantage of relative devaluations in sterling,” Make UK said.

Brexit trade disruption was an additional factor, it said.

The Make UK survey was conducted between August 10 and August 31 – before Liz Truss became prime minister and announced plans to help households and businesses through the coming months.

The government said on Wednesday it would cap wholesale electricity and gas costs for businesses at less than half the market rate from next month, helping relieve the pressure of soaring energy costs but adding to the government’s fast-rising spending.

(Reporting by Humza Jilani, editing by Andy Bruce)