Pre-heat the oven to 190c°/gas 5. Line 2 baking trays with greaseproof paper.
In a bowl add the butter and sugar and mix until together. Beat in the egg and vanilla extract, a little at a time.
Gradually stir in the flour to form a dough.
Roll the dough out on a lightly floured work surface to a thickness of around 1cm. Using a biscuit cutter, cut biscuits out of the dough, roll out the remaining dough and repeat until all used up.
Place the biscuits onto the baking trays and bake in the oven for 8-10 mins or until pale golden brown. Set aside on a wire rack to cool.
For the icing, sift the icing sugar into a bowl, and water to form a smooth mixture.
Spread the icing over the biscuits, add the sprinkles and leave to set.
Store in an airtight container.