The blaze broke out inside a multi-storey car park when a vehicle exploded next to the venue as a show jumping event was being held.
People were forced to leave flats nearby due to a wall of smoke that also infiltrated the arena, forcing organisers to cancel the horse show's evening session.
It is believed a Land Rover erupted in flames on the car park's third level and the fire spread to multiple vehicles.
Witnesses heard "loud bangs" and saw horses in the road after the animals were evacuated from a lower floor.
Police said all vehicles in the 1,600-capacity car park are destroyed and it appeared to be almost full.
There were 21 fire engines at the scene and a number of police vans as crews battled the blaze.
Police confirmed there are fears the building may collapse entirely.
A witness said: "I could hear loud bangs. The cars were still there and we had to leave the car.
“There was police on the scene, horses in the road, lots of banging and smoke. I can’t get to the car so I'm having to walk to Lime Street for the train.”
Mayor Joe Anderson later wrote on Twitter that "everyone was safe and no animals were hurt".
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