Water companies across England and Wales leaked more than 3.3 billion litres of water a day in 2010/11, according to Ofwat, the economic regulator of the water and sewerage industry.
The Environment Agency has urged companies to do more to tackle leakage rates.
Anglican and Southern were among the companies to fail to meet their water leakage targets last year.
Richard Aylard, Thames Water sustainability director, defended his company:
They are not obscene, they are high, partly a consequence of very old pipes, 20% of London's water pipes are over 150 years old.
With this ban we would expect to see up to 150 million litres of water a day saved.
To get the same saving from replacing leaky pipes would cost £1.2 billion and take 10 years so we have to be practical about this.
Millions of homeowners have been banned from using hosepipes from today as drought grips parts of the country.
Deep underground, the drying-up boreholes of East Sussex show the extent of the UK's drought problem.
20 million people across the south and east of England will be hit by hosepipe bans that have come into effect since midnight.