Such a development, commonly known as "hard Brexit," will happen if the British parliament does not back the Withdrawal Agreement that Prime Minister Theresa May has reached with the EU. The agreement has been rejected twice by lawmakers and will be put to a vote again next week.
EU leaders have warned the U.K. that it has one last opportunity to leave the bloc in an orderly way. The EU offered to delay U.K.'s departure until May 22 if British lawmakers support May's deal. If they once again reject the agreement, Britain will leave the EU on April 12 without a deal.
"I think that hard Brexit would hit the U.K. very hard. I think they'd go into recession. I think you'd have a real adjustment of their currency and asset values," Schwarzman told CNBC's Eunice Yoon at the China Development Forum in Beijing. Blackstone is one of the world's biggest private equity firms and asset managers.
"At least from just reading things, it doesn't appear they're at all prepared for something of that type. And I don't know if their public would really want to do that if they had the chance to vote on, it as compared to other alternatives," he added.
Schwarzman's comments contrasted sharply with Brexit supporter Nigel Farage's claims Friday. Farage, the former leader of the U.K. Independence Party, told BBC radio that a growing number of British people will support leaving the EU without a deal after the bloc offered to delay U.K.'s exit.
— Reuters contributed to this report.