Ten people have been helped to safety after a sinkhole opened up in a Shropshire canal, pulling in boats and discharging large volumes of water on to surrounding land.

Emergency services declared a major incident after the 50-metre-long sinkhole breached the canal in the West Midlands, leaving boats teetering on the edge of a steep drop or stuck at the bottom of the cavity.

Local people thought they were caught up in an earthquake when the collapse began in the early hours of Monday morning, and there were fears that water would flood into the nearby town of Whitchurch.

There are no reported casualties and people were being assisted by the fire service, according to West Mercia police.

Shropshire fire and rescue service said it had received reports of a canal bank collapse at about 4.22am, with large volumes of water escaping into surrounding land. “Three boats had been caught in a developing sinkhole approximately 50 metres by 50 metres in size and crews helped more than 10 members of the public to safety,” it said in a statement.

“Firefighters have been working in challenging conditions with unstable ground and rapidly moving water, crews immediately established upstream and downstream safety sectors and began mitigating water flow using barge boards and water gate systems.”

About 12 residents from nearby moored boats were being supported and relocated to a welfare centre at the former Whitchurch police station, according to the fire service area manager, Scott Hurford.

He added: “A major incident was declared at 5.17am however as of 8.30am the situation was stable with water flow reduced and there is no ongoing search and rescue activity.”

The breach took place on the Llangollen canal near New Mills Lift Bridge, Whitchurch, according to the Canal and River Trust, a charity that maintains 2,000 miles of historic canals and rivers in England and Wales. It is investigating the cause and working with agencies to return water levels on either side of the breach as soon as possible.

“There are three or four canal boats that have been impacted by the sinkhole which rapidly happened. The lack of casualties is an absolute miracle,” the Shropshire Star newspaper was told at the scene by Sho Abdul, a councillor and member of Shropshire county council’s cabinet.

“We were so shocked when we saw it. It’s an absolute crater, it’s devastating, especially for the people who use this area often. It’s sad, with Christmas just around the corner, but more importantly no one was hurt.”

Andy Hall, another councillor in Whitchurch, told the BBC that people had initially thought there was an earthquake. “To the right, we’ve got the field which has taken probably about a million gallons of water out of the canal,” he said.

“The most important thing is that the canal itself has been secured by fire and rescue. Their biggest worry was that the canal was going to burst even more and flood residents in the town.”

It remains unclear whether sinkholes are on the increase in the UK, as many are never recorded. However, there are sporadic surges in sinkhole formation, usually linked to prolonged spells of heavy rainfall.