I am a mandated reporter in the US--I have no option but to report to the authorities if I learn of possible abuse. The court system doesn't give me an option about that because, in the long history of such abuses, the justice system here, like that in the UK, has come to recognize that children can be protected from such abuse only if responsible adults act on the information and don't waste time thinking "Should I report this? I don't know, it might not be true, she / he might have made it up, my relatives might be angry with me if I report this, it's stirring a hornet's nest," etc. etc. etc. You did the right thing. You did the only thing you could possibly do if you are a good grandmother--and believe me, this proves that you are. I am sorry that the upshot is currently so distressing for you, and I hope that in time your daughter will behave responsibly too--but thank God you did. I admire you for doing the right thing, thinking of your granddaughter's welfare rather than your own comfort.
I suspect that a child of her age is extremely, extremely unlikely to imagine / make up sexual activity; wiser heads may set me straight, but I don't think so. If that's true, that makes it even more honorable that you reported what she said.